Winter Fuel Payments

Lord Higgins: My Lords, I beg leave to ask the Question standing in my name on the Order Paper. I declare an interest in a winter fuel payment.
	The Question was as follows:
	To ask Her Majesty's Government when they expect that all those entitled to winter fuel payments will have received them.

Baroness Hollis of Heigham: My Lords, perhaps I may discourage the rest of your Lordships from making similar declarations of interest. This winter (1999-2000) for the first time all winter fuel payments were made before Christmas. We plan that that should happen again next winter.

Lord Higgins: My Lords, I am grateful to the noble Baroness for that Answer. Is it not the case that although the Government have made winter fuel payments to a number of people who are not on low incomes, by the end of the winter they will not have made similar payments to a number of men aged between 60 and 65 who may well be on low incomes? First, did no one in the department realise that the European Court was likely to make a ruling which would result in men aged between 60 and 65 being entitled to payments? If so, why were no contingency plans made? Secondly, the Government make winter fuel payments without a means test but last Session used their majority in the Commons to force through a major long-term contributory benefit for disabled people on a means-tested basis. On what principle do the Government now decide whether a particular benefit should be means tested?

Baroness Hollis of Heigham: My Lords, immediately the European Court gave its judgment the Secretary of State announced that the Government would respond to it in the spirit in which the Court intended. As the noble Lord will be aware, the original proposal was that winter fuel payments were to be awarded to pensioners over the age of 65 in the case of men and over the age of 60 in the case of women. The judgment in Taylor insists that men should get the payments on the same terms as women. It is worth emphasising that by 2020 women's retirement age will match that of men. Therefore, at that stage men and women alike will receive winter fuel payments at age 65, on the presumption that they still exist. The matter is complicated. Well over 50 per cent of the new recipients are in work, and as a result we do not have easy access to their records. The details of the delivery arrangements, including the claims process, will be announced shortly. We plan that both back-dated payments and payments to the newly eligible should be made by Christmas.

Kosovo: Civic Reconstruction

Baroness Williams of Crosby: asked Her Majesty's Government:
	What machinery has been established by the Organisation for Security and Co-operation in Europe to assess its experience in reconstructing civil society in Kosovo, and to reform and reduce the bureaucratic delays that have damaged its effectiveness.

Baroness Scotland of Asthal: My Lords, the mission of the Organisation for Security and Co-operation in Europe in Kosovo is doing a vital job under difficult circumstances as part of the United Nations-led international effort to lay the foundations for democratic stability. Management of the mission is primarily the responsibility of its head, who provides weekly reports to member states and regularly reports in person to the Permanent Council of the Organisation. However, participating states routinely feed in comments and advice gathered in particular from their offices in Pristina and from senior officials who visit the mission to review its work and operations. The combined effort has helped to ensure that the mission continues to make a vital contribution to the efforts of the international community in Kosovo, particularly in the area of human rights, preparing for elections, police training and establishing an effective judicial system.

Baroness Williams of Crosby: My Lords, the Minister has my sympathy for what is an extraordinarily difficult operation. Does the noble Baroness accept that the relative slowness of the establishment of the civilian mission meant that the PBTK, the political wing of the KLA, was able to establish itself in a great many parts of the local administration in Kosovo? First, can the Minister inform the House whether the lessons learnt at the Istanbul Summit about the need for rapid reaction forces in the civilian as well as military spheres is being taken on board? Secondly, will the OSCE now work more closely with local NGOs, local women's groups and others so that the people of Kosovo feel that they themselves own the process of democratisation and that it has not been largely brought in from outside?

Baroness Scotland of Asthal: My Lords, I reassure the noble Baroness that, the Istanbul Summit having agreed with the OSCE that a civilian rapid response mechanism known as Rapid Expert Assistance and Co-operation Teams should be developed, the point has been taken on board. Those teams will be operational by 1st July and will link an operations centre in Vienna with matched national databases.
	The noble Baroness is right to say that the OSCE has faced a huge challenge in the work that it has undertaken. The systems in place have had to be modified as time has gone on to try to meet the changes in the situation. The matter has been taken very seriously to try to ensure that the process is as smooth and seamless as possible, but we are challenged and those challenges are being met.

Lord Jenkins of Putney: My Lords, does my noble friend agree that it is unfortunate, to say the least, that this situation has occurred? Does it not strengthen the developing view that the entire NATO operation against Serbia was a mistake?

Baroness Scotland of Asthal: My Lords, it does not. Kosovo creates huge difficulties for all of us. I do not need to remind noble Lords that for 10 years Kosovar Albanians lived in fear under the menace of Serb repression. They lost their jobs, institutions and, in many cases, their lives. In 1998 and 1999 innocent civilians were subject to systematic violence reminiscent of Europe in the 1940s. The international community had a choice: to intervene or turn away. Both were difficult; either would have led to controversy or criticism; and neither would have avoided further violence. There was no simple solution which we chose to overlook. Notwithstanding the challenges that Kosovo made us all face, we could not but have done what we did. Otherwise all of us would have been covered with shame.

Lord Lamont of Lerwick: My Lords, does the Minister agree that effective policing is an important part of civil society? Has the UN contributed only 2,000 of the promised 6,000 policemen? Do many of them speak neither the local language nor English? Since it will take time to train local policemen, what is being done to fill that gap?

Baroness Scotland of Asthal: My Lords, we have responded to the request regarding provision of police officers. Another 60 police officers are likely to go from the MoD. Twenty police officers will be helping. Your Lordships will know that 40 are already training. Training of the police service is essential. We are putting a huge amount of energy into ensuring that we make an effective and proper contribution.

Lord Chalfont: My Lords, the Minister says that we had a choice of turning away or intervening. That is accepted by, I think, all noble Lords. The next question is: how do we do that? Does the noble Baroness agree with the implication of the question asked by the noble Lord, Lord Jenkins, that what we did might have been done rather better?

Baroness Scotland of Asthal: My Lords, I cannot agree with that. Noble Lords in this House will know how keenly all the issues were considered during the period. The reaction and response undertaken by Her Majesty's Government, together with our partners, were cogent and sound. We did that which was necessary to meet the needs of the circumstances as they then appeared. It is too easy to forget that what we did was in fact successful. Milosevic did withdraw.

Lord Stoddart of Swindon: My Lords, is the Minister aware that not everyone will agree with her version of the history of intervention in Kosovo. However, is not the problem at present that the KLA is determined that it will have an independent Kosovo, possibly attached to Albania as a single country? Because of that, it is increasing the violence against its Serb neighbours in the hope that NATO will once again come to its rescue and fight the Serbs to ensure that the KLA achieves its objective--an independent Kosovo?

Baroness Scotland of Asthal: My Lords, I hear what the noble Lord says. But we have done everything within our power to make it plain that we do not agree with that. KFOR, including General Jackson, is satisfied that demilitarisation was genuine and effective. KFOR continues to seize illegal weapons when it finds them. The Kosovo protection corps is there to support UNMIK and specified humanitarian tasks. We are facing that issue squarely.

Lord Moynihan: My Lords, in the week of the anniversary of the start of NATO's campaign against Serbia there is worsening violence in the northern state of Mitrovica, where KFOR troops are targets. There is a law and order vacuum. There are not enough police, as noble Lords made clear today. There is no justice system to speak of. Organised crime is increasing. The UN Secretary-General has pleaded with the international community to provide funds and resources. Can the Minister say when this Government--they rightly prided themselves on taking a lead in winning the war--intend to take a lead in winning the peace in Kosovo before it is lost?

Baroness Scotland of Asthal: My Lords, we have already taken that lead. We are working very energetically with our partners to ensure that we do not, as the noble Lord said, lose the peace. In most of Kosovo the security situation has improved since last year. Mitrovica is a particular problem but the population movements have polarised that city--largely the Serb north and Albanian south. Tensions are being exploited by extremists on both sides. The goal of UNMIK and KFOR is an undivided Mitrovica in an undivided Kosovo; and the first step is enhanced security. We are doing much to ensure that that takes place.

Lord Pilkington of Oxenford: My Lords, I admire the contribution Her Majesty's Government are making to the police force. However--it is possible I did not hear well--I felt that the Minister failed to answer whether Her Majesty's Government were satisfied with the total response of the United Nations.

Baroness Scotland of Asthal: My Lords, we are satisfied that we are taking all the steps necessary to meet our commitments. We are encouraging all our partners to do likewise.

Sellafield: Thorp and Mox Plants

Lord Razzall: asked Her Majesty's Government:
	In the light of recent events at British Nuclear Fuels Limited, what is their policy regarding the future of the Thorp and Mox plants at Sellafield.

Lord Sainsbury of Turville: My Lords, the Government's policy on reprocessing and on the export of Mox remains unchanged. The Health and Safety Executive's report published on 18th February identified serious failures in BNFL's management of safety at Sellafield. Nevertheless, HSE confirms that the site is currently operating safely. BNFL needs to take action urgently to restore confidence and a good start has been made with the appointment of Norman Askew as the new Chief Executive.

Lord Razzall: My Lords, I thank the Minister for that Answer. Is now the time for a complete re-think of our nuclear waste strategy? Does the noble Lord agree that the Thorp plant at Sellafield, which reprocesses nuclear waste primarily for Japan and Germany, has proved to be a massive white elephant? Does he also agree that if the Government give full approval for the mixed oxide fuel plant at Sellafield, this will compound the previous government's error over Thorp?

Lord Sainsbury of Turville: My Lords, this is not the time for a complete reappraisal. We have a serious failure of management, not a failure in the policy or design of the processing plants. Far from being white elephants, they have huge contracts stretching into the future which are of enormous value.

Lord Northbrook: My Lords, does not the Minister believe that the best way to solve BNFL's management problems is to privatise it and that the Government should not be put off from doing so by the problems with Germany and Japan?

Lord Sainsbury of Turville: My Lords, no. Clearly, this is a setback for the company and has implications for its performance and readiness for the introduction of a PPP. We shall continue to work on that, but it is dependent on proper safety and regulations.

Lord Jenkin of Roding: My Lords, can the Minister give the up-to-date position on the Japanese contracts?

Lord Sainsbury of Turville: My Lords, discussions are taking place with the Japanese about the fuel at Takahama and all the options are being examined as regards progress.

Lord Stoddart of Swindon: My Lords, is my noble friend aware that the falsification of documents, particularly in a dangerous nuclear plant, is very serious and that the people who perpetrated such action ought to be prosecuted? Are they going to be prosecuted?
	Secondly, is the Minister aware that for a long time fears have been raised about the plant not only members of this Government, but by members of the Irish Government, too?
	Thirdly, will the Minister confirm that the Nuclear Installations Inspectorate has always had a permanent presence at Sellafield? Why was it unable to pick up the bad running which, in the light of what has happened, was always evident?

Lord Sainsbury of Turville: My Lords, I hope I made it clear at the beginning that we believe there to have been serious management failures. That is why we have a new chief executive and why five members of the staff have been dismissed. The Nuclear Installations Inspectorate picked up the failures and reported on them and steps have been taken to correct them.

Lord Elton: My Lords, before the Minister can answer some of these questions, is it not necessary to know for what purpose the security procedures were falsified, how it was possible to do that and what steps will be taken to ensure that it never happens again? When shall we be told that?

Lord Sainsbury of Turville: My Lords, it is clear from the reports that the records were falsified simply because the workers in the area did not want to do the work; it was easier to produce false documentation. That is why the breach of management procedures was outrageous and why serious action has rightly been taken.

Lord Dormand of Easington: My Lords, is this not another reason why the Government should return to their emphasis on the coal industry? Is my noble friend aware that this country has millions of tonnes of unmined coal and that we are producing it more cheaply than any other country? Is that not another good reason?

Lord Sainsbury of Turville: My Lords, we are talking about a reprocessing plant rather than about the nuclear power stations. Again, I reiterate that we should not confuse a failure of management with the need to revise our energy policy.

Lord Jenkins of Putney: My Lords, do not the events show that reprocessing breeds a climate of deception and is likely to do so in future? Therefore, should we not abandon the whole proposition of reprocessing?

Lord Sainsbury of Turville: My Lords, there is nothing to suggest that there was any disaffection in relation to the matter. As I said, it was a failure of both management and workers and it can happen in other plants and factories--and it does from time to time. It is important to correct the situation and regain the confidence of the public and the customers as soon as possible.

Ascension Island: Control of Feral Cats

Lord Beaumont of Whitley: asked Her Majesty's Government:
	What steps they are taking to eradicate feral cats from Ascension Island in pursuance of their obligation under the United Nations Convention on Biodiversity.

Baroness Scotland of Asthal: My Lords, the Foreign and Commonwealth Office has agreed to fund a £30,000 feral cat control programme on Ascension Island. That should kill 90 to 95 per cent of the feral cat population. The control programme will promote a successful breeding season for sooty terns on Ascension.
	With our non-governmental organisation partners, especially the Royal Society for the Protection of Birds, we are seeking funding for the Ascension Island management plan. The plan includes an invasive species eradication programme. Any remaining feral cats will be picked up by that eradication project.

Lord Beaumont of Whitley: My Lords, I am delighted to learn that the Government have had the sense to enter into partnership with the RSPB and to take it up on its offer to clear the island of feral cats. Are they aware that there are in the St Helena dependencies some of the most important biodiversity treasures in the world and that this is an important test of their willingness to put forward enough money--and by the standard of most issues which are discussed in this House it is minor--to ensure that the programme works?

Baroness Scotland of Asthal: My Lords, we are taking the issue most seriously. The noble Lord is correct in saying that we should be rightly concerned with the biodiversity of the region. The initiative is part of the Ascension Island management plan. The Royal Society for the Protection of Birds and the Foreign and Commonwealth Office are seeking funding for the plan, which will need in the region of £1.5 million.

Baroness Gardner of Parkes: My Lords, is the Minister aware that in the Adelaide Hills of South Australia a somewhat unusual professor, who wears a hat made from a cat and says that the only good cat is a dead one, has fenced off an area of 25 acres in order to keep out feral predators such as cats and foxes? The scheme has been so successful that platypuses and other animals which had found it almost impossible to breed are multiplying in the enclosed, safe area. Is she further aware that feral cats are a danger not only to birds but to mammals? Scores of Australian mammals have been wiped out this century, almost more than in any other country in the world.

Baroness Scotland of Asthal: My Lords, your Lordships will be surprised to know that I was not so aware, but, as always, I am most grateful to the noble Baroness for drawing it to my attention. Regrettably, it is not possible to erect fencing in the Ascension Islands. There are more than 1,200 cats, only 300 of which are domestic, and 900 people. Therefore, regrettably, fencing is not promoted.

Baroness Fookes: My Lords, may I make a plea that the unfortunate cats are dealt with humanely? If the Government are calling on the RSPB, perhaps they can also call on the RSPCA or a similar organisation for advice on the matter.

Baroness Scotland of Asthal: My Lords, I am pleased to be able to tell the noble Baroness that such advice has been sought. In the plan, we are assured that the most humane method of disposing of the cats will be undertaken. However, I should tell your Lordships that we need to sweep away the cats in order to protect the sooty terns.

Terrorism Bill

Brought from the Commons, read a first time, and to be printed.

Consolidated Fund (No. 2) Bill

Lord McIntosh of Haringey: My Lords, I beg to move that the Bill be now read a second time.
	Moved, That the Bill be now read a second time.--(Lord McIntosh of Haringey.)
	On Question, Bill read a second time; Committee negatived.
	Then, Standing Order No. 46 having been suspended (pursuant to Resolution of 17th March), Bill read a third time, and passed.

Financial Services and Markets Bill

Lord McIntosh of Haringey: My Lords, I beg to move that the House do now again resolve itself into Committee on this Bill.
	Moved, That the House do now again resolve itself into Committee.--(Lord McIntosh of Haringey.)

On Question, Motion agreed to.
	House in Committee accordingly.
	[THE CHAIRMAN OF COMMITTEES in the Chair.]
	Clause 2 [The Authority's general duties]:

Lord Kingsland: moved Amendment No. 47:
	Page 2, line 2, at end insert ("and market abuse").

Lord Kingsland: In moving Amendment No. 47, I wish to speak also to Amendments Nos. 63 to 69. As Members of the Committee are well aware, the intention of Amendment No. 47 is to add to the objective contained in Clause 2(2)(d), which reads,
	"the reduction of financial crime",
	the expression "and market abuse". It seems to us extraordinary that in a Bill whose main innovation is the concept of market abuse, reducing market abuse does not appear as one of the Bill's four objectives.
	That would be more understandable if the Government had been prepared to designate market abuse as a criminal offence. As the noble Lord is well aware, setting market abuse in the context of the European Convention on Human Rights, it is the Opposition's view that market abuse is indeed a criminal offence. However, as the Government do not accept that approach, I simply cannot understand why the objective clause contains the reduction of financial crime but not the reduction of market abuse. That is the reason for Amendment No. 47.
	The remaining amendments--Amendments Nos. 63 to 69--to which I shall now speak, have a more technical objective. Most of those amendments simply add the expression "market abuse" to "financial crime" in order to be consistent with the amendment of the objectives. However, I shall say something in a little more detail about Amendments No. 66 and 68.
	As the Minister is aware, Clause 6 relates to the Financial Services Authority's reduction of financial crime objective. Members of the Committee are aware that in considering that objective, the Financial Services Authority must have regard, among other things, to the desirability of regulated persons taking appropriate measures to prevent financial crime. Amendment No. 66 seeks to delete the word "prevent" and insert the expression "reduce the risk of their businesses being used for". The reason for the amendment is that regulated persons cannot be expected to prevent financial crime, but they can reasonably take measures to reduce the risk of their businesses being used for financial crime.
	Finally, I turn to Amendment No. 68. The focus of Clause 6 and the Financial Services Authority's reduction of financial crime objective relates to reducing the extent to which it is possible for a business, which is carried on by a regulated person in contravention of the general prohibition, to be used for a purpose connected with financial crime. Therefore, there is no express obligation on the Financial Services Authority to identify financial crime or to alert consumers and other users in the market place to persons who are suspected of engaging in financial crime. This amendment is intended, at least partially, to redress that situation by requiring the authority, so far as is practical, to alert regulated persons to the activities and identities of those engaged either in financial crime or market abuse. I beg to move.

The Earl of Caithness: This may be an opportune moment to say a few words about Amendment No. 69, which is in this grouping. It is opportune that this amendment is before your Lordships on the same day as the report on banking has been received by the Government. I have not yet had the opportunity of seeing that report. However, from what I have heard on the radio, the report contains a reference to the appalling delay that we in this country all suffer from the way that the banks hang on to our cheques before clearing them. It seems that the banks have slowed down in clearing cheques through accounts in a ratio converse to the advance of technology and the benefits of speed which that has brought about. I hope that the Minister will be able to say something on that particular point this afternoon.

Lord McIntosh of Haringey: I am grateful to both the noble Lord and the noble Earl. These amendments fall naturally into two groups. The effect of the first group would be to convert the present objective on the reduction of financial crime into an objective concerned with the reduction of financial crime and of market abuse; in other words, to associate market abuse with that objective in particular. Although I acknowledge that there is overlap between market abuse and financial crime in some areas, the insertion of "market abuse" into this objective is not necessary and, I believe, could cause confusion and send the wrong messages.
	The purpose of the market abuse regime is to protect the UK financial markets from the damage that can be caused to them by abuse. In order to operate effectively and efficiently, the markets rely on market users to observe expected standards of conduct, as we shall discuss when we reach that part of the Bill. If people do not do that, and if they abuse the trust of the markets, then confidence will be damaged. The markets will work less well as people seek to protect themselves from the risks of abuse by entering into transactions at higher prices or by entering into fewer transactions.
	Therefore, the ground is covered by the objective on maintaining confidence in the financial system. That, of course, includes maintaining confidence in financial markets and exchanges. That is what the market abuse regime is all about. That is not to say that there is no overlap with the territory covered by the financial crime objective. However, the objectives all overlap to a certain extent; for example, market abuse will often also adversely affect consumers. For example, if people buy shares on the back of misleading information, they lose money.
	It is true that some forms of more serious market abuse, such as insider dealing, criminal fraud, which is a matter for the common law, or money laundering, will also be criminal offences under this Bill or under other enactments. However, that will not always be the case. Behaviour which comes within the offences of insider dealing and market manipulation, for example, will, broadly speaking, be subsets of behaviour which can come within the market abuse regime. To that extent, the financial crime objective already covers some forms of market abuse. The matters which the FSA will have to consider as regards systems and controls in Clause 6(2) will also be relevant to market abuse. In any event, we should expect the FSA to have an interest in systems and controls designed to detect and prevent market abuse as a result of the market confidence objective.
	However, I believe that there is a danger of confusion if we insert a reference to "market abuse" in that objective, which is concerned only with regulated business or business which should be regulated. Doing so would appear to restrict the FSA's objectives in the area of market abuse. The new regime extends to the unregulated as well as to the regulated.
	I believe that market abuse is adequately and properly covered by the objective on market confidence. Maintaining market confidence is at the heart of what the market abuse regime is intended to achieve. I prefer to keep that clear, as I believe it is clear under the Bill as drafted.
	The second group of amendments deals with the scope of the financial crime objective. I understand the thought underlying the first of those amendments, which would replace the reference in subsection (2)(b) to regulated persons taking measures to "prevent" crime with a requirement that those measures "reduce the risk of crime". I can see that the amendment is intended to reduce the burden on business. But I still do not believe that it is necessary.
	The provisions of this clause do not impose obligations on anyone other than the FSA. The clause does not impose a responsibility on regulated persons. It is all about the responsibilities of the FSA. In deciding what to do in pursuit of the objective, among other matters, the FSA must have regard to the principle in Clause 2(3) that a burden should be proportionate to the benefits.
	Clearly, the regulated community has a key role to play in reduction of financial crime, but of course we appreciate that business should not be asked to take on tasks that it cannot reasonably be expected to carry out. "Taking appropriate measures to prevent crime" does not steer the FSA into requiring that firms spend vast sums on taking the possibility of financial crimes down to zero.
	We have already made changes to respond to concerns on that score. Following consultation on the draft Bill, the Government replaced the reference to "adequate" measures in the objectives to "appropriate" measures. I do not believe that the suggested amendment would have any further effect beyond that.
	While I understand the aim of Amendment No. 68, I think it would be unhelpful to place a requirement on the FSA to alert regulated persons to the activities and identities of those engaged in financial crime or market abuse.
	There is a whole range of functions which the FSA will be able to exercise in relation to the reduction of financial crime; for example, giving guidance, mounting prosecutions, co-operating with other agencies and putting out information. The general approach in the Bill is not, however, to tie the particular aspects of the FSA's statutory duties to particular functions. That would reduce flexibility.
	If a person is convicted of an offence involving financial crime or is found to have engaged in market abuse, then it will be possible to publicise that fact. In many circumstances that will be the right thing to do. It will be right for the regulator to alert people to the activities of criminals or those engaged in market abuse. If it is appropriate, the FSA will do that.
	Amendment No. 69 has been referred to by the noble Earl, Lord Caithness, particularly in the context of the Cruickshank report which was published this morning. I am sure that he will appreciate that that is a 350-page report to which the Government have made no formal response, although it is entirely possible that in his Budget tomorrow, the Chancellor may wish to pay some attention to the recommendations of Mr Cruickshank. But in advance of any formal government response, which may take some time, it may be inappropriate for me to make any further comment on that point.

The Earl of Caithness: I accept that the noble Lord cannot comment on the Cruickshank report, but will he comment on the principle of the amendment?

Lord McIntosh of Haringey: The amendment has not been spoken to by its mover. Therefore, it is not entirely appropriate for me to do that without some stimulus.

The Earl of Caithness: I disagree with the noble Lord. The amendment is in the hands of the Committee. It has been spoken to. Whether or not that is by the mover of the amendment is totally irrelevant. That is a poor excuse for not giving me a reply.

Lord McIntosh of Haringey: I am happy to give a reply but I should rather have given it, having been given the opportunity to hear the arguments put forward by the mover of the amendment. I seek only to defer a reply rather than to avoid giving a reply.
	However, I shall give the noble Earl my initial thoughts on the subject. Without prejudging any response that the Government may give, I understand that the Cruickshank report pays considerable attention to the issue of cheque clearance, which is included in this amendment. I have no doubt that we shall consider very carefully our response to that.
	I understand also that the Treasury and the Department of Trade and Industry have referred those aspects of the Cruickshank report to the Competition Commission. Therefore, the matter will certainly be an issue of public debate in the months to come.

Lord Elton: Perhaps the Minister will take us a little more carefully through his opening objections to my noble friend's Amendment No. 47.
	He started by resisting it on the grounds that coupling it so closely with financial crime in the same objective would confuse the issue because financial crime and market abuse are only partially coterminous. I take it that that difficulty would be removed by making the reduction of market abuse free-standing within that subsection.
	But the Minister then put the pith of his argument almost into a single sentence. He said that in his view the regulatory objective of market confidence was sufficient for the purpose of creating a duty on the authority to regulate market abuse and making that an objective because, if there was market abuse, confidence would be diminished.
	But if that argument is valid in relation to market abuse, which is not to be included, it must surely be valid in relation to financial crime because financial crime will also reduce confidence in the market. Therefore, what is sauce for the regulatory goose must be sauce for the regulatory gander. Perhaps the noble Lord will tell the Committee his other reason for resisting this amendment, other than that which could be overcome by tabling my noble friend's amendment as paragraph (e) rather than as part of paragraph (d).

Lord McIntosh of Haringey: The two parts of the argument complement and strengthen each other rather than being separate arguments which could be overcome in the way which the noble Lord, Lord Elton, suggested.
	I said at the beginning that it would be wrong to associate market abuse only with financial crime as one of the objectives. I said that that was because market abuse overlaps with a number of the objectives but is associated in particular with market confidence, although I acknowledge that there was an overlap both with financial crime and with the protection of consumers.
	But the implication of that is not that it would be right to have a fifth objective--market abuse--but that the coverage of market abuse was adequately achieved by the market confidence objective, with which we shall deal in more detail in the later clauses of the Bill. I said also--and it is another reason for rejecting the noble Lord's suggestion--that market abuse is covered separately for a significant reason; that is, it is designed to apply not only to the regulated community but to everyone. It must therefore be dealt with separately from the objectives and principles which relate specifically to the regulated community. For those reasons, if the noble Lord were to return with a fifth objective, it would not be acceptable to the Government.

Lord Elton: To clear my mind entirely on the matter, is the Minister in effect saying that there are both regulatory and non-regulatory objectives for the authority; that the regulatory ones are set out in Clause 2(2) and that the others are to be deduced, as it were, from the titles of the succeeding parts of the Bill, Part VIII being concerned with market abuse?

Lord McIntosh of Haringey: They are all regulatory objectives. It is not that there are non-regulatory objectives, but that the objectives set out in Clause 2 with the principles set out in the subsequent clauses relate to the regulated community. There can be regulatory objectives which go beyond that, as indeed, market abuse does.

Lord Peston: I have no great strength of opinion on the amendment itself, but do I understand my noble friend rightly? Is he saying that the authority will be able to consider all aspects of market abuse in their entirety, to expose all aspects of market abuse in their entirety and to deal with all aspects of market abuse in their entirety under the "market confidence" heading? It does not matter whether anything is specifically said, so long as the Minister can assure us that those three aspects of market abuse are all dealt with by the Bill and can and will be dealt with by the authority. I speak as someone who is a consumer in that regard and, as always, as someone who believes in Adam Smith's dictum that only consumers matter when such phenomena are judged.

Lord McIntosh of Haringey: It is certainly true that all market abuse can be thought of as damaging market confidence and therefore as coming under the heading, "market confidence". But I made it clear also that there are forms of market abuse which are damaging in terms of financial crime and of consumer protection.

Lord Elton: I believe that the noble Lord, Lord Peston, and I are seeking a response on the same issue: will the authority be capable of dealing with market abuse when the market abuse is conducted by someone who is not a regulated body?

Lord McIntosh of Haringey: Yes. That is what the whole of Part VIII of the Bill on market abuse is about.

Lord Peston: Will my noble friend reflect again on the amendment of my noble friend Lady Uddin and the intervention of the noble Earl, Lord Caithness, in regard to it? It seems to me absurd that we should ask my noble friend to comment on a 350-page report today. However, purely a priori in terms of first principles, in a world where one can send an e-mail message which reaches the United States virtually instantaneously and all sorts of other transactions take place through computers in such a way, does not my noble friend agree that it is ridiculous that it takes five days for a cheque to clear?

Lord McIntosh of Haringey: The answer I can best give is the statement made this morning in response to the Cruickshank report by the Secretary of State for Trade and Industry and the Chancellor of the Exchequer. Stephen Byers said that the health of small and medium firms is crucial to the success of the economy and the employment of many people. The provision of banking services is an important influence on their prospects for growth and success in the future. The Cruickshank report considers that there is a substantial case for a reference of the market. He considers the issues identified and the concerns expressed about this important area to be such that the provision of banking services to SMEs should be fully investigated by the competition commission.
	I believe that that answers my noble friend's point about the seriousness with which the Government take the recommendations from Mr Cruickshank. It enables me also to confirm that the Chancellor will make a further response covering other recommendations of the Cruickshank report in the Budget statement tomorrow.

Lord Kingsland: I yield to no one in my admiration for the draftsman of the Bill. It is a monumental achievement, but, on occasion, even giants stumble. My noble friend Lord Elton surely put his finger on the real problem: if market abuse is subsumed in "market confidence", why is not financial crime? We are entitled to conclude from the way in which the subsection is drafted that, if financial crime is incapable of falling within market confidence, then surely the same must be true of market abuse.
	It would therefore be reasonable to conclude, on the current drafting, that control of market abuse is not one of the regulatory objectives. That conclusion would be extremely inconvenient for the Government, because there is no doubt whatever that where a regulated party commits an alleged act of market abuse, it will be much easier to attack that party under the rules relating to regulation than it is under the rules relating to market abuse. This is not a party political point. It is simply a question of making the Bill clear. There will be serious consequences for people who transgress under the Bill. Their lives may be ruined by it. They are entitled to understand the law clearly. Why will the Minister not add that clarification?
	With enormous respect to the Minister, we had exactly the same problem on day one of Committee stage in relation to non-executive directors. We tabled four amendments to clarify the Bill. The Minister said that he agreed with the substance of each amendment, but he believed that the Bill did not need changing because it was absolutely clear. With great respect, it must have been absolutely clear only to him. It was certainly not absolutely clear to any of the Opposition Front Bench, nor indeed to any of those who advise the Opposition Front Bench. I hope that the Minister will reconsider non-executive directors by Report stage. Here is an opportunity for the Minister to reconsider now the objectives clause. Why on earth would the insertion of "market abuse" not clarify something which clearly is not clear at present?

Lord McIntosh of Haringey: I am afraid that I disagree about both non-executive directors and about market abuse. It seemed to me at the time and seems to me now that the amendments about non-executive directors appeared to be based on a misunderstanding of the role of non-executive directors. Noble Lords opposite have persistently referred to the functions of the non-executive directors committee, which is the committee comprised only of non-executive directors, while ignoring the fact that all of the points they were making were perfectly well covered by the role of non-executive directors as directors; in other words, as members of the board, which is wider than their responsibilities as members of the non-executive committee. That misunderstanding eviscerated the arguments for the amendments relating to non-executive directors. That is as true now as it was then.
	When the noble Lord talks about the danger of confusion, I can say only that what I said at the outset seems entirely clear. There is a danger of confusion if we insert a reference to market abuse in this set of objectives, which is concerned only with regulated business or business that should be regulated. If we were to insert a reference to market abuse, we should appear to be restricting the FSA's objectives in the area of market abuse because the market abuse regime extends to the unregulated as well as to the regulated.
	Of course, it is possible, as the noble Lord said, that financial crime may reduce confidence in the markets. Financial crime such as insider dealing and market manipulation can damage markets and the interests of consumers. There is an overlap between the objectives, but not all financial crime damages market confidence and it would be as inappropriate to put market abuse under the heading of financial crime as it would be to put it under the heading of consumer protection.

Lord Alexander of Weedon: Having heard two-thirds of this discussion, I ask the Minister whether he can indicate whether the point of anxiety as expressed by other noble Lords could be met if we added to Clause 3(1), which states:
	"The market confidence objective is: maintaining confidence in the financial system",
	the words:
	"including the prevention of market abuse".

Lord McIntosh of Haringey: That seems to me to suffer from the same objections to which I have referred.

Lord Alexander of Weedon: I understand that Clause 3(1) not only applies to regulated activities but also to the activities of those who are not regulated. Therefore, that subsection could include a provision on the prevention of market abuse.

Lord McIntosh of Haringey: No, the objectives as set out in Clauses 3, 4, 5 and 6 are the regulatory objectives that are set out in Clause 2. Clauses 3, 4, 5 and 6 expand on the detail of those objectives but they do not go beyond the objectives that are concerned with regulated business or business that should be regulated. If the noble Lord or any other noble Lord were to table an amendment to that effect I would consider it with all due seriousness.

Lord Elton: Doubtless we shall return, with great pleasure, to this issue in Part VIII. In so doing I believe that we should have regard to the language used as it will impinge on those who are not professionals in this area or lawyers. As the noble Lord has said, Part VIII applies to the unregulated market and it applies a code of conduct, with the assistance of the courts, that will regulate that market quite tightly. It seems to me that we shall need another word to describe that when we get there. However, I do not want to delay matters at this stage.

Lord McIntosh of Haringey: As the noble Lord has put words into my mouth, perhaps I should make it clear that market abuse applies to the unregulated as well as to the regulated community.

Lord Kingsland: I am deeply disappointed with the series of replies that the Committee has received from the Minister. Tempted though I am to divide the Committee on this issue, I shall content myself with the task of reading his labyrinthine observations and return to the matter on Report. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.
	[Amendment No. 48 not moved.]

Lord McIntosh of Haringey: moved Amendment No. 49:
	Page 2, line 18, leave out ("any exercise of its general functions") and insert ("anything done in the discharge of those functions").

Lord McIntosh of Haringey: Clause 2 sets out the FSA's general duties. The FSA's general duties are that in discharging its general functions under the Bill it must act in a way that is compatible with its objectives, as set out in Clause 2(2), and that it must have regard to the matters in Clause 2(3). The FSA's objectives concern the aims of regulation. The matters in Clause 2(3), commonly referred to as the "principles", condition the manner in which the FSA regulates.
	Their effect is to act as checks on regulation, helping to ensure that the FSA regulates in the optimum way. Optimal regulation will rarely be the absence of regulation. Unless appropriate protections are in place, consumers will be loathe to trust their money to the industry. The result would be under-investment, under-insurance and too little saving in the economy.
	Well regulated markets attract consumers; they are more efficient and more effective at doing their job, allocating resources within the economy to where they are best employed. However, one can have too much of a good thing. Over-regulation can have the same effect as under-regulation, driving out consumers, this time by increasing the prices that they must pay rather than the risks that they face.
	The overall effect of Clause 2 is to help to ensure that we get the right amount of regulation--neither too much nor too little. Among the key things to which the regulator must have regard in achieving that is the need for players in the market to be able to engage in healthy competition. Healthy competition between firms is in the interests of consumers, firms and the industry itself. It is a vital element of economic growth.
	Clause 2(3)(f), therefore, places the FSA under a duty to have regard to the need to minimise the adverse effects on competition that arise from any exercise of its general functions. The FSA has to consider carefully, whenever it makes rules, whenever it prepares codes, whenever it gives general guidance or whenever it determines its general policy, the need to come up with a result, in terms of how it regulates, that causes the least damage to competition. That is vital. Regulation, of necessity, will almost always have an effect on competition. That is simply the effect of imposing restrictions on people.
	Government Amendment No. 49 is a technical amendment which makes a drafting change. At present Clause 2(3)(f) refers to the exercise of the FSA's general functions, which repeats what is said in the chapeau to the clause. I did not know what a chapeau to a clause was, but it is the centred, italic heading to be found above a clause which, strictly speaking, is not part of the Bill. The amendment just tidies up the drafting.
	In the spirit in which I was urged to respond to an earlier amendment which had not been spoken to, perhaps I may be allowed to refer to Amendment No. 50, tabled by my noble friend Lord Eatwell, together with the noble Lords, Lord Taverne, Lord Newby and Lord Sharman. It would have the effect of deleting Clause 2(3)(g). That subsection was inserted into the Bill in another place in the light of the recommendations of Don Cruickshank's interim report on banking services. I have not checked on the concordance between the interim report and the final report, but the thrust of that report's recommendations was that the FSA should ensure that it takes full account of competition concerns in the way that it regulates.
	Clause 2(3)(g) builds on the requirement in Clause 2(3)(f) to minimise adverse effects on competition by placing the FSA under a further duty to have regard to the desirability of facilitating competition between those it regulates as well. This is very much in line with the duty in Clause 2(3)(d) concerning the facilitating of innovation in connection with regulated activities.
	Clause (2)(3)(g) requires the FSA, in going about its job, to consider whether there are ways of doing things which can make it easier for regulated firms to compete, just as it has to consider whether there are things that it can do to make it easier for firms to come forward with innovative products or ways of doing things. The whole area of transparency and giving consumers information, for example, is relevant to that principle. In deciding whether and in what form to publish aggregate information--for example league tables--it is right that the FSA should be influenced by the desirability of facilitating competition as well as the need to minimise adverse effects. In other words, it is about doing things rather than not doing things.
	I must emphasise that that does not turn the FSA into a competition regulator, nor does it give it a function of promoting competition. That is not an objective. It conditions the way in which the FSA goes about meeting its objectives. I beg to move.

Lord Borrie: Perhaps it is convenient for me to speak to Amendment No. 50, which is grouped with Amendment No. 49, as my noble friend Lord Eatwell has asked me to move it on his behalf, together with those who have added their names to the amendment. My noble friend is unavoidably absent at the moment but may be present in the Committee later.
	I believe that all noble Lords will agree that prudential regulation, to which a lot of this Bill refers, should not stifle competition. Clause 2(3)(f) deals with it by saying that,
	"In discharging its general functions, the Authority must have regard to ... the need to minimise the adverse effects on competition".
	However, as my noble friend Lord Eatwell has already emphasised, one of the key roles of the authority must be the management of risk. In response to my noble friend a few days ago, the Minister agreed that the management of risk is clearly part of the authority's statutory objective of securing market confidence.
	Unfortunately, "facilitating" or "promoting"--I am not sure that I yet understand the Minister's distinction between those two activities--competition, as set out in paragraph (g) of this clause, may very well involve an increase in risk both to consumers and, indeed, to the financial system as a whole.
	When the Financial Services Authority is properly seeking to protect the public against financial risk, in what way should it have regard to the need to facilitate competition? Does paragraph (g) mean that the authority should expose consumers to certain risks simply in order to facilitate competition? Does the Minister envisage extra risks for the consumer which he or the authority will be prepared to tolerate in order to assist competition?
	To my mind, paragraph (f) is one thing, while paragraph (g) is another and they do not necessarily combine correctly in the Bill. Of course the authority should always test its activities against the criterion of any adverse effects they may have on competition. However, that is covered in paragraph (f) and also in the detailed competition scrutiny provisions set out in Part X and Part XVIII of the Bill, which we shall no doubt come to in a few weeks' time. In my view, what the authority should not be doing is promoting competition or, I suggest, facilitating it.

Lord Newby: Along with the noble Lord, Lord Eatwell, I have also put my name down to this amendment which seeks to delete paragraph (g) in Clause 2(3). We on these Benches support the amendment because we felt that two kinds of confusion might arise in the Bill. First, there may be confusion in terms of the role of the FSA, as has already been mentioned. Secondly, we felt that confusion might arise over who is to take responsibility for competition between the FSA, the OFT and the Competition Commission.
	On one of the rare occasions when it could be argued that a little delay in your Lordships' House has been beneficial, we have today received the Cruickshank report, which explicitly deals with this matter. As I began reading the relevant section, I was relieved to see that he reached a conclusion which states:
	"Getting the regulator's primary statutory duties right is essential. These drive the way the regulatory body recruits, organises and rewards its staff. A competition objective that is weak relative to the regulator's other objectives is unlikely to be delivered effectively".
	I feel that I can strongly agree with that statement and therefore Don Cruickshank must agree with our amendment, in that a weak competition provision in the Bill--which is what this will amount to--is clearly unsatisfactory.
	Unfortunately for those on this side of the argument, Mr Cruikshank then goes on to argue that the competition responsibility of the FSA should be greatly strengthened and, indeed, that the FSA should be given primary responsibility for competition. He further states that the optimum outcome,
	"will be most efficiently and accountably delivered if responsibility for it is internalised within the FSA".
	learly, he envisages a structure in which the FSA will have primary responsibility for competition within the sector, with the OFT and the Competition Commission providing a review mechanism and some external oversight if the primary body falls down on the job. For that reason, the second part of the Cruikshank report is, in one sense, deeply depressing because it goes directly against our argument.
	Having heard the Minister's initial comments on this point, in which he seemed to argue that the FSA should not have that kind of responsibility, perhaps we now all need to study the Cruickshank report. For our part, I believe that we shall need to be persuaded of the merit of giving the FSA all the additional powers proposed in the report. If the Cruickshank proposals are to be implemented, that will almost certainly require further amendments, which no doubt the Government will wish to bring forward on Report. However, given the very short time we have had to examine the report, I suspect that we all need an opportunity to read it in more detail and perhaps return to this matter at the next stage.

Lord Jenkin of Roding: I am full of admiration for those who have found the time even to go along to the Printed Paper Office to collect a copy of the Cruickshank report, let alone to have begun reading it. I saw the headline announcing its publication in the Evening Standard, but that is as far as I have got.
	Perhaps I may advert to what I believe is the thinking that lies behind both of these paragraphs. Those of us who were involved in financial services at the time when the first rulebooks came out following the initial raft of legislation in this field will recall feeling appalled by the amount of detailed regulation being put forward. The regulations appeared to prescribe in the most minute detail precisely how products should be described, marketed and sold. Indeed, the regulations seemed to form a salesman's handbook as to how a financial representative should present himself and his product to his customers. I can well remember the angst that was loudly voiced at the time. It was said that it would make competition between life and pension companies--I cite those because that is my area of experience--very difficult. Everyone would have to offer the same projections and present products in much the same way.
	The fear was then voiced that if we continued on down that road, we would end up with a system rather like that in Germany, where for many years a new financial product in, for example, the insurance field could not in fact be marketed until it had been approved as a product by the regulators. The result was that when markets began to be opened up in the European Union, there was great demand on the part of British companies who recognised that this would be a tremendous opportunity. The UK industry was vastly more vibrant, thrusting, inventive and innovative than anything on the Continent. However, liberalisation came only extremely slowly because it did not at all suit the regulators on the Continent. They felt that their regulation would be interfered with in a profound and detailed manner.
	As I read both the paragraphs in the clause, I believe that they indicate that the FSA must not go down that road. The Minister has already made the point that innovation and competition must lie at the heart of the FSA's method of operation. Whenever phrases such as, "When exercising its functions" are used, provision must be made to facilitate and encourage the industry to use the freedom it has to be competitive, while obeying the regulatory requirements in order to avoid those ills aimed at by the rest of the Bill. If that is what is intended, I have to say that I totally support that. It must be right that we do not fall into the same trap, as did the early regulators, of specifying in minute detail the requirements to be imposed on the industry.
	Happily, with experience, the regulators have moved back from that early position. The rule books became progressively less detailed, less mandatory, less prescriptive and moved towards setting out the requirements in terms of principles. If that is what the amendment is aimed at, it must be right.
	In relation to the point put forward by the noble Lord, Lord Borrie, perhaps I can say this. One of the early actions taken by regulators of life insurance at the instance of the Competition Commission--or the Monopolies Commission as it was then called--was to outlaw the minimum commissions agreement which existed between companies and had done for a long time. The ostensible objective was that if the minimum commission rule was removed, then competition would force commissions down. Exactly the opposite happened.
	Once companies were free from what had been seen by the industry as something which they had followed in the interests of the consumers, commissions generally rose. That is an object lesson in not trying to regulate competition too precisely. The Monopolies Commission got that wrong. It worked to the disadvantage of consumers. Nevertheless, it happened and it should be an object lesson for the Financial Services Authority. So I would emphatically resist taking out paragraph (g). That ought to be retained. The paragraph which wants to,
	"minimise the adverse effects on competition",
	is entirely right.
	I spent some happy hours over the weekend catching up with the amendments tabled by the Government, and some of those of my noble friends. Amendment No. 49 is what the Minister described as a technical amendment to paragraph (f). It is not entirely clear to me how it changes the meaning, but one has to accept the view that the draftsmen have their mysteries to which sometimes Ministers and others have to bow. But I am appalled to see the huge number of amendments that appear to be being tabled at regular intervals and are now running into hundreds. Perhaps the Minister can give us some indication as to how many more amendments of this kind, or indeed of greater substance, will be tabled during the passage of the Bill through this House.
	A huge number of amendments were made--some of them very welcome--during the Bill's passage through another place. But it is somewhat shattering to discover that hundreds are still being tabled, most of which do not appear to reflect specific points made in another place or on which representations were made. They are simply the result of the Government having second thoughts as to what is the best way of putting this into legal language. While one is always searching for the optimum way of doing that, one wonders whether it is a sensible way to legislate. I have been told that we are likely to have up to 500 or 600 government amendments. In that case, one-third are already before us. Are we expecting twice as many again? Can the Minister help us on that?

Lord Alexander of Weedon: Perhaps I may follow up my noble friend's last point. As chairman of the Delegated Powers and Scrutiny Committee, I am conscious that the House invites us to consider amendments whenever we can. We do so whenever we can. But it is easier when all the proposed amendments to the Bill come in one tranche rather than piecemeal. I say that at the same time as acknowledging that no one could be more scrupulous and helpful than the Minister in seeking to facilitate the work of the committee by giving us both the amendments and the explanatory memorandum as early as he can. But for all that, the need to look at them piecemeal is neither particularly attractive, nor does it make for an efficient way of working.
	Even on the day that the Cruickshank report is published, perhaps I may say that I am happy to declare that I once worked for a bank. One of the reasons why I am happy to make that declaration is that, as we all know, the SME sector in this country is one of the most powerful contributors to the private economy; it has been one of the most spectacular growth engines over the past 15 years; and it is the most successful within Europe. Across that period it has had the readiest access to finance of any SME sector within Europe.
	But, as I understand it, the view of Mr Cruickshank that the regulator should have the additional objective of responsibility for competition has been known for some time. As I recollect it through exchanges, so too has the view of Mr Howard Davies. But it would be absolutely inappropriate for that objective to be included in the Bill. It only takes a moment's thinking to see why. The reason is that the authority is already the largest regulatory authority in the world with a huge task. We can imagine the difficulty if it had to take on the quite separate responsibility for competition.
	That is the practical objection. The principal objection is that one of the key responsibilities of the authority is consumer protection. If it were also to have the responsibility of promoting competition, it would be set two objectives that could, from time to time, come head on into conflict. It is my understanding--perhaps the Minister will confirm this--that Mr. Cruickshank's views on this issue were known to the Government when they decided (absolutely rightly) not to include a market confidence objective in the Bill.
	We all know the difficulty of consumer protection in this area. We all know the extent to which, increasingly, as a society we are expecting people to take responsibility for their own pensions, insurance needs, secondary pensions and long-term healthcare. We all know the dangers if those products are mis-sold. We saw it vividly in the pensions mis-selling scandal throughout a large part of the last decade. The Institute of Financial Studies says that we are already hearing of such matters anecdotally in regard to the new ISAs. It is critical that the system of consumer protection works. It is unrealistic to say that caveat emptor can operate very far in this complex area of life where most people, unlike some in this Chamber, lack access to an independent financial adviser, let alone have the ability to understand the advice.
	It is paramount that the consumer protection objective should come first. But I welcome the retention of paragraph (g). That requires the authority to take into account the desirability of promoting competition. It makes clear that if that ever comes into conflict with proper regulatory protection of consumers, the promotion of competition must take second place to consumer protection. The Government have the balance right in the Bill and I hope that we can preserve paragraph (g).

Lord Walker of Worcester: I share the view of my noble friend in relation to retaining paragraph (g). There have been a series of innovations in the history of the City of London over the decades that have given it enormous international strength. I can recall two such innovations. I was involved in the 1960s in the introduction of the first-ever equity-linked life policy in this country. All of the establishment in life insurance were against it and said that it was not safe and added to risk. However, I am pleased to say that over the years they followed our example.
	In recent times we have seen direct selling of insurance. The established houses would say to their policy holders that the established insurance company, with branches all over the country, is much safer than the direct selling operations by Direct Line and other companies. In practice, it has been a great and successful innovation, bringing benefit to policy holders throughout the country.
	I welcome the inclusion of paragraph (g) and hope that it will be retained.

Lord Kingsland: The Opposition Front Bench also supports the retention of paragraph (g). Two years ago there was a long debate during the passage of the Competition Bill on the relationship between the contents of paragraphs (f) and (g). The origin of paragraph (g) in this Bill is misplaced. Unlike the Bill, most of the industries that were the subject of the Competition Bill debate were nationalised industries. They all started off as public monopolies that were then privatised following which the process of facilitating competition had to be injected into them by the regulators.
	It was very clear that the draftsman of the Competition Bill, quite rightly, did not wish to give the responsibility of initiating competition to the Director-General of Fair Trading. In the Competition Bill there was a clear distinction between the task of the Director-General of Fair Trading, to deal with the traditional problems of competition, and the task of initiating competition, or facilitating the initiation of competition, which were issues for regulators. I am not sure that it can be said that paragraph (g) represents a long tradition, but in the world of regulatory operations two years is a long time. The Minister will be surprised that at least on this occasion I support the Government's position.

Lord McIntosh of Haringey: I should like to make it clear from the outset that I am not Don Cruickshank, and I shall resist the temptation to comment favourably or unfavourably on what he says. That does not mean, however, that I can resist the temptation to quote him when he seems to be supporting the Government--which I am sure is forgivable.
	Paragraph 2.130 states:
	"The Review welcomes the progress the FSA has made in setting out how it will align its new regulatory approach with these objectives."
	In addition, the report notes in relation to the review's interim report:
	"The Government, in response, committed itself to securing that the FSA gave full weight to competition concerns and took account of the effect of its rules on competition in the light of market developments. It has since brought forward a number of amendments to the FSMB to achieve this".
	My noble friend Lord Borrie used the description "a weak competition objective". He appeared to think that facilitating was the same as promoting. I rebut both those claims. This is not a weak competition objective; it is not a competition objective at all. Competition is a matter for the competition authorities. As I said at the outset, and as the noble Lord, Lord Jenkin, recognised, it is not the FSA's job to tell people how they should compete. The purpose is not to steer the FSA to tell the markets how they should operate where there are no consumer protection or market confidence concerns; it is to encourage it to remove unnecessary competition barriers, as in the earlier example in relation to removing unnecessary barriers to innovation.
	This principle of good regulation--and perhaps we should always be talking of principles of good regulation, which is how the FSA describes it, rather than just principles, as described in the Bill--should guide the FSA in deciding its policy on how quickly it processes applications for newcomers, the level of entry requirements and the issue of league tables. The more players there are in the market, the more competition there is. Provided adequate protections are in place, this can only be a good thing. These matters are not so precisely covered by the requirement to measure the adverse effects of competition as they are in paragraph (f).
	I do not accept that facilitating is the same as promoting; and I do not accept what my noble friend Lord Borrie says about exposure to risks. None of the examples that I have given involves any increase in exposure to risks. Clause 2(3)(f) does not override the FSA's duty to provide consumers with an appropriate level of protection. The point is simply that the desirability of facilitating competition is something to which the FSA should have regard in meeting its primary objectives, including consumer protection.
	I am grateful to all noble Lords who have pointed out the different roles of the FSA, the Office of Fair Trading and the Competition Commission. There would be confusion between the three if the FSA did not have a competition objective, but the matters in Clause 2(3) do not concern the aims or purposes of regulation, because that is the role of the objectives, but the manner of regulation. As the noble Lord, Lord Jenkin stated, in discharging its general functions, the FSA shall have regard to the desirability of each of these items.
	There are those who wish to remove paragraph (g) and those who wish to strengthen it--although they have not been so vocal today--but I think we have the right balance. I commend the amendment to the Committee.

On Question, amendment agreed to.
	[Amendment No. 50 not moved.]

Baroness Turner of Camden: moved Amendment No. 51.
	Page 2, line 20, at end insert--
	("(h) the desirability of facilitating as far as possible access to financial services for disadvantaged consumers.").

Baroness Turner of Camden: I speak on this occasion as a consumer, although many years ago I worked for an insurance company and also had some connection with the PIA when I was chair of the PIA Ombudsman Council.
	This is a probing amendment. It concerns the access of low income households to financial services. According to the National Consumer Council, which has kindly sent me some briefing, 1.5 million low income served households use no financial services at all. That is a serious matter.
	Governments, including this Government, have increasingly turned away from social provision provided by state agencies, and the present thinking looks to the private sector to fill the gap. The Minister will not be surprised to hear from me that this is not a development that I welcome; nevertheless it appears to be a fact of life and we have to come to terms with it.
	I can remember that when I was very young my mother used to put money aside for the man from Liverpool Victoria, who duly entered it in a book that she held. That kind of home insurance cover is gradually disappearing. I recently met representatives of Liverpool Victoria in my capacity as a member of an all-party financial services group. They informed us that they were no longer involved in this market because the amount of form-filling and general regulation involved in selling a £10 a month policy meant that the business was no longer profitable. Despite the criticisms often made of home service business, it did at least mean that poorer people had some access to financial services. But that is largely a thing of the past.
	The Government recognise the need for suitable financial services to be available and accessible to consumers across a whole range of needs. I welcome the consumer protection objective, but it does not guarantee that the particular interests and needs of disadvantaged customers will be met or even properly considered. The FSA ought to be able to consider and act according to the interests of the most needy. This could, for example, involve cross-subsidy on the costs of regulation for smaller, non-profit-making organisations--perhaps credit unions. There could possibly be an information campaign to highlight products most suited to those on a low income.
	Incidentally, I believe that mutual societies have done a much better job than the ordinary financial services industry in providing services to marginalised communities. I wish that some way could be found to protect mutuals from carpet-baggers. I looked very closely at the Bill but, unfortunately, I could not find a way of writing an amendment that would enable me to raise the issue. No doubt I lack the appropriate technical expertise. Nevertheless, I draw the attention of the Committee to that issue because it is a pity that such mutual societies are disappearing. In view of the social role played by financial services, it seems that a statutory requirement to facilitate access for the disadvantaged would be appropriate. I beg to move.

Lord Newby: I rise to express my support for the arguments put forward by the noble Baroness, Lady Turner. In doing so, I shall speak also to Amendment No. 61. Amendment No. 51 was moved in almost identical terms by my colleague Dr Cable in another place. In replying to his arguments, which were almost identical to those advanced by the noble Baroness, the Minister in the other place said that the Bill did not need such a provision for two reasons: first, there was already a consumer awareness objective in Clause 4; and, secondly, the consumer protection objective in Clause 5 had a bearing on the issue and, therefore, the amendment was simply unnecessary.
	Much of the debate on amendments has centred around whether the Bill is permissive or specific in the sense that on many amendments both today and last Thursday we have heard the view that one can actually do things under the Bill that such amendments seek to specify and that, therefore, we do not need them. We wish to have regard to the problems of disadvantaged consumers. We want to try to ensure that this requirement is given greater weight than is currently the case. In Clauses 2 and 5 the Bill already sets out a whole raft of considerations to which the authority must have regard but there is nothing specific there about disadvantaged consumers.
	Therefore, we have tabled an amendment not to amend the earlier part of the Bill but to amend Clause 5, which already specifies a number of types of consumer and types of business to which the FSA must pay particular attention. We believe that the interests of the disabled or chronically sick, pensioners, individuals on low incomes and individuals residing in rural areas should be mentioned specifically in the Bill so that the FSA has a positive duty in this area. In doing so, we chose our words relatively carefully. The amendment employs exactly the wording in both the Utilities Bill and Postal Services Bill as regards dealing with disadvantaged consumers. Quite frankly, if such wording is good enough for those Bills, we cannot see why it should not be included in this legislation.
	One of the key thoughts in our mind is that, among the plethora of considerations that the FSA has to take into account, the concern for disadvantaged consumers should be given greater weight. There is also the question which may or may not be a problem in reality but, which, nevertheless, concerns both us and the National Consumer Council; namely, the extent to which the FSA can under this legislation do the kind of thing that it may wish to do to support disadvantaged consumers.
	In respect of credit unions, Howard Davies has already said that he hopes that the way in which the FSA regulates such unions will help that movement,
	"to achieve its full potential to offer low-cost efficient financial services to local people, and make an important contribution to offset the serious problem of financial exclusion".
	We agree; indeed, there could be cases where the cross- subsidy on the costs of regulation might be relevant to credit unions. However, in the absence of a statutory requirement to aid disadvantaged consumers, the FSA might find it hard to justify such measures in the future. Moreover, the authority might feel constrained from funding information campaigns that specifically highlight products most suited to those on low incomes or that warn elderly people to guard against unfair sales practices. When considering such issues, we must bear in mind that there have been many examples of unfair sales practices.
	In our view, the argument for encouraging disadvantaged people to take up financial products and financial services, especially where they find it very difficult to do so, is an extremely strong one. The argument for the FSA having this as an explicit duty is equally strong. By not adding to the objectives of the authority but simply specifying a distinct group of consumers who need particular protection and care, we believe that Amendment No. 61 should be welcomed by the Government.

Lord Alexander of Weedon: Perhaps I may express a few words of sympathy with these amendments. During my time in banking, it was clear to me that there were key issues regarding both financial literacy and availability of banking services that affected a significant part of the population. I saw various estimates of numbers, but I never saw an estimate lower than 20 per cent. Driven as they are by the demands of their shareholders, and however much their management would like to do so on personal grounds, it is very difficult for the mainstream banks to pursue areas of banking activity that, though not immediately profitable, would benefit the health of society as a whole.
	I realise that there may be difficulties in the extent to which the FSA can act to implement such amendments. That is possibly one of the reasons why the noble Baroness tabled this as a probing amendment. However, I can see areas that the authority could consider in terms of financial education. Indeed, the noble Baroness mentioned the encouragement of credit unions.
	There is also one other area for consideration in this respect. In the United States--the home of the free markets--there is, none the less, legislation that requires mainstream banks to engage in a proportion of community redevelopment banking activity. When I surveyed the US scene it seemed to me to be healthy and, interestingly enough, to be capable, when properly handled, of generating profitable clients. I do not pretend that this is an easy issue because it goes with the wider issues of inadequate literacy and numeracy across the board, to which Sir Claus Moser drew our attention with such clarity last year. I have sympathy with the desirability of an amendment that would give the FSA not only the obligation but also, as the noble Lord, Lord Newby, said, the express freedom to be active in these areas.

Lord Kingsland: We support this amendment and hope that the Government will also do so. In that context, I was particularly struck by the words of the Minister in response to Amendment No. 47 earlier today. I sought then to say that the FSA would find it very difficult to prevent financial crime, but the Minister was not prepared to accept that. If the noble Lord thinks that the FSA can prevent financial crime, he surely must think it well within its grasp to facilitate, as far as possible, access to financial services for disadvantaged consumers.

Lord McIntosh of Haringey: Before I discuss my noble friend's amendment I wish to say a few words about the home service insurance business, to which she referred. The Government have announced that the industrial assurance Acts, which have always been so burdensome and have regulated home service insurance business, will be repealed. The business will be regulated under the Bill. This has been welcomed by the insurance industry. We are also taking steps to help credit unions and friendly societies to conduct their business more effectively. We recognise the importance of the role they play in helping the financially excluded.
	Amendment No. 51 would introduce into Clause 2 a requirement that the FSA has regard to the desirability of facilitating access to financial services for disadvantaged consumers. That would move the FSA towards trying to tackle financial exclusion. This is an issue that has come up before and it has been considered carefully and seriously, both by the Government and by those who have scrutinised the Bill in Parliament.
	When the Joint Committee published its first report its conclusion was that, if the Government wished to impose social and ethical obligations on financial services businesses, they should do so directly rather than via the FSA. The Government agree with that conclusion. The Joint Committee stated at paragraph 62 of its first report that additional duties,
	"would make life unnecessarily difficult for a regulator responsible for prudential supervision, and would damage lines of accountability. If the Government wishes to impose social or ethical obligations on financial services business, it should do so directly".
	Of course this is a matter of serious concern. My noble friend raises an important point. However, I do not believe that this is something which should be tackled through the Bill. Adding in the requirement proposed in the amendment would distract from the FSA's core role as a financial regulator, cutting across its main objectives. If we are to maintain clarity as to duties and lines of accountability, and allow the FSA to act effectively as a regulator, it is important that we should be clear in the objectives that we are setting.
	In any case, the terms of the consumer protection and public awareness objectives are relevant to tackling financial exclusion. The objectives do not exclude disadvantaged consumers; they are applied to all consumers. For example, the appropriate level of protection will depend on the nature of the consumer and of the product and will affect our proposals for the deregulation of business carried on by a number of mutual societies. They will enable those societies to provide services which they are not able to provide at present.
	I turn to Amendment No. 61. Clause 5 expands on what is meant by the FSA's regulatory objective of protecting consumers. It deals with the protection appropriate to different types of consumers. There will, of course, be wide experience and expertise across society as a whole. Therefore the needs of consumers for advice and information will differ, and their particular circumstances will be one factor in that equation.
	But this clause already requires the FSA to have regard to that spectrum of needs. Adding a paragraph requiring that the interests of particular social groups should be taken into account would at best muddy the waters and at worst lead to an unfair focus on the needs of particular groups, possibly at the expense of the needs of consumers in other groups. I do not want to be too particular because obviously the noble Lord could have produced a whole range of disadvantaged consumers. However, I suggest that his list would place particular importance on the needs of, let us say, an experienced financial adviser who is retiring to the countryside--two of the criteria on the noble Lord's list would apply to such a person--but would exclude people who were, for example, poorly educated, or particularly inexperienced in financial matters, or who belonged to ethnic minorities, or had language difficulties, and many others. If one includes such a list, one immediately gets into all kinds of difficulties.
	It is essential that the FSA, in seeking to secure the appropriate degree of protection for consumers, takes account of the various needs of all consumers, whatever the origin of those needs. Clause 5(2) currently embraces all consumers, including those consumers who might fall into one of the groups referred to in the amendment.
	I appreciate that Amendment No. 51 has gained support from all sides of the Chamber. I can only repeat my sympathy with its objectives. However, it would not be an appropriate measure for a regulatory body concerned with prudential supervision. I hope that my noble friend will treat it as a probing amendment.

Lord Fraser of Carmyllie: Before the noble Baroness decides whether or not to withdraw the amendment, I wish to ask the Minister a question. He has advanced a clear and coherent argument as to why this measure should not be imposed on a financial services regulator. At the present time the Utilities Bill is progressing through another place. I understand that the Government intend to impose certain social and ethical duties on utilities regulators which would cover disadvantaged customers. If that is an appropriate course to follow in the case of gas, electricity or water, I am baffled as to why that should not apply also to financial services.

Lord McIntosh of Haringey: After many years in this Chamber I have learned never to look at Commons Bills until they have finished their passage through the Commons. In that way I concentrate only on the final version rather than on a version which may be before another place at any particular time. The Utilities Bill is a particularly good example of that philosophy. I would have wasted my time had I spent days mugging up on the telecommunications and water parts of the Utilities Bill. There are differences as between financial services, utilities and postal services, which have been referred to. I can best illustrate that point by referring to what happened this morning. We take seriously the needs of disadvantaged consumers of banks. That is why we have referred the relevant aspects of the Cruickshank report to the Competition Commission. We do not intend to do nothing, but we think that such action is not appropriate for this Bill.

Baroness Turner of Camden: I thank my noble friend for that response. I described the amendment as a probing amendment. I wrote it and I was not absolutely certain whether it was technically correct. I hoped that if I spoke to it my noble friend might agree to consider it and bring back a government amendment along the same lines on Report. Unfortunately, my noble friend has not said that. However, he has commented helpfully on home service insurance and on credit unions, for which I thank him.
	Nevertheless, I still feel that there is, or should be, a responsibility on the FSA to take some account of the socially disadvantaged, mainly because, as I said when I moved the amendment, the Government expect the financial services industry to play a social role and to provide services for people who many years ago may have looked to the state to provide those services. In other words, the financial services industry is expected to fill the gap, as it were, that is left by the withdrawal of the state from a number of welfare services.
	I do not intend to seek the view of the Committee on the amendment this afternoon. I shall consider what has been said. The issue is sufficiently important to return to it on Report, having considered what my noble friend has said and having considered the contributions that those on all sides of the Chamber have made. I thank those who have contributed to the debate. I am grateful for the level of support that has been evidenced this afternoon. I hope that it will have convinced my noble friend that the Government should reconsider this matter before Report. In the meantime I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.
	[Amendment No. 52 not moved.]
	Clause 2, as amended, agreed to.
	Clause 3 [Market confidence]:
	[Amendments Nos. 53 to 57 not moved.]
	Clause 3 agreed to.
	Clause 4 [Public awareness]:
	[Amendment No. 58 not moved.]
	Clause 4 agreed to.
	Clause 5 [The protection of consumers]:

Lord Borrie: moved Amendment No. 59:
	Page 3, line 14, after ("take") insert ("reasonable").

Lord Borrie: At Second Reading I ventured to quote from the late Professor Gower, a sometime professor of commercial law at the London School of Economics who conducted the one-man inquiry on behalf of the previous government prior to the Financial Services Act 1986. He said that legislation should not try to protect consumers from their own folly but should properly seek to protect them from being made fools of.
	Consumer protection is one of the Bill's four regulatory objectives. It is amplified in Clause 5 to mean:
	"securing the appropriate degree of protection for consumers".
	In considering what degree of protection may be appropriate, the authority must have regard to a number of items, three of which I have no objection to at all; I think they are eminently reasonable. It should have regard to:
	"(a) the differing degrees of risk involved in different kinds of investment;
	(b) the differing degrees of experience and expertise that different consumers may have;
	(c) the needs that consumers may have for advice and accurate information".
	have no quarrel with any of those. But then paragraph (d) states that the authority should have regard to:
	"the general principle that consumers should take responsibility for their decisions".
	I am not happy with that because, even allowing for the factors in paragraphs (a), (b) and (c) which I have just quoted, it seems to amount to a very crude exemplification of caveat emptor, which for the ordinary non-business consumer is quite wrong. It is inappropriate when one considers the normal imbalance between the degree of knowledge, skill and expertise typically available on the part of the provider of the financial services compared to the relative inexperience and non-expertise of the ordinary consumer.
	As long ago as the 19th century, the common law recognised that in selling goods, even to business consumers and traders, the crude rule of caveat emptor was modified by a condition that the goods be reasonably fit for their purpose and be "merchantable", a word which is out of date and is now translated in modern language as "of reasonable quality". In more recent years in the 20th century, any contractual clause seeking to exclude such a condition that goods be reasonably fit for their purpose and of reasonable quality has been rendered void in the case of ordinary consumers and is subject to a test of reasonableness in the case of business consumers.
	In regard to the requirement that the consumer takes responsibility when buying financial services, my amendment seeks to qualify the consumer's responsibility for his or her decision to buy a financial product by requiring the authority to have regard to whether in any particular case it is reasonable for the consumer to take responsibility for his or her decision. If the product is not reasonably fit or suitable for the consumer's purpose, where the provider has completed a so-called "fact find"--as he normally has to do nowadays--and therefore knows all about the consumer's circumstances, it would not be reasonable for the consumer to take the full, unqualified responsibility and to have no come back on the provider. Financial products are very often more important than ordinary consumer goods; they are normally less frequently purchased than ordinary consumer goods, and it is odd that the consumer should have so much less protection.
	The Minister will be aware that the annual report for 1999 of the Financial Services Consumer Panel recommended a complete deletion of this part of Clause 5 of the Bill; it recommended the deletion of the so-called general principle that consumers should take responsibility for their decisions. I do not want to quote all of the report, just one sentence. The consumer panel said:
	"Caveat emptor (let the buyer beware) already exists as a general principle in contract law and we believe that its unnecessary insertion in the Bill could be interpreted as demanding a further degree of consumer responsibility--an ambiguity that leaves the door open for mischievous legal challenges to the FSA's consumer protection activities".
	My amendment does not go so far as the Financial Services Consumer Panel in wanting to delete the provision altogether. I do not deny that the consumer should have a responsibility for his or her decision; I am simply saying that the word "reasonable" should be inserted. Surely the Minister must feel bound to accept the amendment. I beg to move.

Baroness Turner of Camden: I wish to speak to Amendment No. 60, which is grouped with Amendment No. 59. The amendment seeks to write into the Bill a requirement for the provision of "best advice". I am sure that we all appreciate that many of the people who become dependent on the private insurance business to provide what amounts to social support--whether through savings or to provide for retirement and so on--will have very little experience of utilising financial services at all.
	When I was chair of the PIA Ombudsman Council, many of the complaints we received arose because people had no idea of what they might reasonably expect and often they had been sold a product which was not suitable for their needs. The Bill states that people must accept responsibility for their own decisions. I support the amendment of my noble friend Lord Borrie which seeks to write "reasonable" into the clause. That is fair. But the national Consumers' Association points out that this is the reverse of the situation with ordinary goods. The Sale of Goods Act provides a statutory guarantee that goods are reasonably fit for the purpose for which they are needed--my noble friend referred to that in support of his amendment--and that is surely important when it comes to financial products. Purchasers may be making decisions which are desperately important for them and for the financial security of their families.
	There is of course a need for better education in relation to financial issues. When I was at the PIA I had to produce a report each year on the work of the Ombudsman Bureau, and we made a particular point each year of emphasising that. It would be a good idea to emphasise in legislation a requirement to provide a product suitable for the client's needs, a "best advice" requirement. I hope that the Government will be prepared to accept the amendment.

Lord Jenkin of Roding: Perhaps I may say a word, principally in response to the speech of the noble Baroness. The phrase "best advice"--which entered into the language because it was included in many of the rule books--is a misnomer because no one really knows in most circumstances what would be the best advice. "Good advice" can generally be described, and one can form a view as to whether the advice that was given to a particular consumer was good. In the vast majority of cases it should always be sufficient to say that the consumer had good advice. I hope that the Financial Services Authority may come to recognise that that is a better test of advice than "best advice" when, with the best will in the world, most people are not able to say which is the best advice that the consumer might have been given.
	Perhaps I may take up a point made by the noble Lord, Lord Borrie. He referred to the Sale of Goods Act. That Act was the first statutory provision for the balance between buyers and sellers in the sale of goods. I was brought up to believe that it was one of the finest Acts on the statute book. It was short and made clear to everyone exactly what the duties were. My recollection is that it contained no more than 20 or 30 clauses. The Bill we are discussing must be 100 times longer in terms of the number of pages and words simply because this legislation deals with matters infinitely more complex than the sale of goods 100 years ago.
	Nevertheless, the principle must remain: if someone spends money on a product, some part of the responsibility must rest with the buyer. One has heard a great deal about mis-selling. There undoubtedly was mis-selling. But, equally, there was a great deal of "mis-buying". People were no doubt induced by stories and by friends to rush in. Look at what is happening presently in the ".com" revolution. I suspect that there is a great deal of mis-buying rather than mis-selling going on. I believe that there is some responsibility on buyers, whether of goods and services or of financial products.
	I am not sure whether the word "reasonable" is necessary. It always sounds churlish and unreasonable to resist the inclusion of the word "reasonable" in a statute. But I am not sure that it adds anything to this provision. The clause is based on the general principle that consumers should take responsibility: that should be enough. If this amendment is intended to water down that concept, I should resist it. I believe that consumers should take responsibility. Equally, a huge burden of regulation is being imposed on those who sell products to make sure that they sell them responsibly.

Lord Lipsey: I am tempted to speak partly because the noble Lord, Lord Jenkin, referred to the difficulties with the concept of "best advice". As I am sure he knows, the rule book of the existing regulator also contains a concept of "better than best advice". If noble Lords have three or four hours to spare after our debates, I shall be delighted to explain its impact.
	This is a tricky issue, and we are indebted to the noble Lord, Lord Borrie, for raising it. The trouble is that in this area it is very hard to get consumers to take responsibility. People who will not buy a microwave without touring every shop in south London before forking out £100 will, however, buy an extremely expensive pensions policy on the least possible examination. Every salesman will tell you that when he hands over the "key features" document, which he must hand over before selling a product, the customer will say, "Do I really have to read this?" That is a very difficult question for the salesman to answer. The regulator would have to say that he should answer "yes", and the salesman would like to think that he could say "no", so he probably says "yes" and "no".
	It is important that the Bill should emphasise the responsibility of consumers with regard to financial products. If they rely entirely on those who are flogging them to take the full responsibility, that will never work. A much better understanding of the products and what they can deliver is needed on the part of customers in order to fulfil their objectives. But at the same time it is important that regulators, and those of us who are discussing the Bill, should realise that there will never be consumers out there in the real world who are able to give the full force of their attention and who have the full range of concepts available to assess every aspect of the product that is laid before them.
	The amendment seeks to move the balance just a fraction in favour of not relying too much on consumers. It goes to the essence of that balance. I would lean by a millimetre towards accepting it and accepting the point made by my noble friend Lady Turner in speaking to her amendment. It is a narrow point. If Ministers feel that this is a carefully negotiated balance, they would be justified in saying that they believe the balance lies the other way.

Lord Sharman: In rising to support these amendments, I should like to develop the thought introduced by the noble Lord, Lord Lipsey, that this is an issue of balance. The amendment seems to suggest that in Clause 5(2)(d)the balance of responsibility has moved too far towards the consumer and away from the provider. We see that as particularly important, because financial services are complex. They are purchased relatively infrequently--probably less frequently than the microwave referred to by the noble Lord, Lord Lipsey. In many cases their performance can be judged only over a relatively long term. It is therefore important that the balance between the responsibilities of the provider and those of the consumer should be somewhat more in favour of the consumer than under the Bill as presently drafted.
	I was struck by the comments of the Financial Services Consumer Panel. The noble Lord, Lord Borrie, referred to the panel's report. In the letter that transmitted that report, the chairman of the panel, Barbara Saunders, said:
	"The FSA is working in an area where few consumers are confident or knowledgeable about financial products and financial advisers may not explain things well".
	She went on to refer to a survey which confirms absolutely the comment of the noble Lord, Lord Lipsey, namely, that,
	"few consumers shop around for investment products--one third of people in the survey looked at only one product provider".
	One of Barbara Saunders' conclusions is that,
	"almost one in three consumers did not feel confident about trusting banks and insurance companies with their long-term savings. And almost one quarter felt that long-term savings in the UK were not secure".
	When we ally the results of that kind of survey to the balance in the Bill as it stands--very much in line with caveat emptor rather than "fitness for purpose"-- I believe that the balance is wrong, and that the Bill needs the kind of adjustment that both amendments provide.

Lord Alexander of Weedon: For me, too, the balance comes down fairly and squarely in support of both amendments. I understand the anxiety of my noble friend Lord Jenkin regarding the concept of "best advice" to which the noble Baroness referred. "Best advice" is an elusive ambition. It is very difficult, given the multitude of products on sale, to expect "best advice" to be achieved by every independent financial adviser. As I understand it, the amendment proposed by the noble Baroness does not import the concept of best advice; it imports effectively the concept of "sale of goods".
	If that applies, say, to the purchase of a microwave, as already mentioned, I have no doubt that it ought to apply to something as important as people's long-term savings. I remain of the view that, however well products are explained to people, the choice is not easy to understand. It may be that I am over-scarred by memories of the Securities and Investments Board and the need to redress the pensions mis-selling issue. But that issue was wide in scale. It affected very respectable organisations and smaller providers alike. No one within the market was immune. The damage to confidence in the industry was considerable and there was a need for consumers to take responsibility for their pensions. Considerable anxiety was caused to consumers by the need to enter into the process of redress.
	This is a dynamic industry and--I know that I have come back to this point several times--there has been a growth in the type of services, including long-term healthcare, which consumers are having to take for themselves, in my view rightly. In that sense consumers are taking rightful financial responsibility for their future. I should like to see that develop further. But I see the counterpoise as being proper consumer protection. On that basis, I think both amendments are wholly reasonable.

Lord Faulkner of Worcester: I rise to speak in support of the amendments. Indeed, the noble Lord, Lord Sharman, has pre-empted me by quoting from the letter sent by Barbara Saunders, which I received only today along with the annual report of Financial Services Consumer Panel. The survey to which the noble Lord referred and from which he quoted is very telling. I was struck by the panel's strong plea about the Bill's caveat emptor provisions. Early on in its report the panel fairly makes the point that the inclusion of the consumer panel as a statutory requirement was inserted at the instigation of the Joint Committee, chaired by the noble Lord, Lord Burns.
	The amendment of the consumer protection objective also tilts the balance a little further in the consumer's direction as it acknowledges the consumer's need for advice and accurate information. The panel states:
	"Caveat emptor already exists as a general principle in contract law and we believe that its unnecessary insertion in the Bill could be interpreted as demanding a further degree of consumer responsibility, an ambiguity that leaves the door open to mischievous legal challenges to the FSA's consumer protection activities".
	That is right. The degree of ignorance that there is about financial products and the degree of mistrust that exists, which I suspect will not have been lessened by the publication of Mr Cruickshank's report today, and the fact that only 6 per cent of the people surveyed--this is the part of the survey which the noble Lord, Lord Sharman, did not quote but it is also important--could name the FSA as the official watchdog, show that the balance is still not quite right.
	I hope very much that the Government will take on board the comments made by my noble friends Lord Borrie and Lady Turner in considering whether the Bill can be strengthened in favour of the consumer in this very modest way.

Lord Donaldson of Lymington: Perhaps I may suggest that the two amendments should be looked at in a slightly different light. As far as concerns the amendment of the noble Lord, Lord Borrie, it is a pure question of construction. Construction of an Act of Parliament must always have regard to its context. I find it difficult to believe that a court approaching subsection (2)(d) of Clause 5 would construe it as meaning other than "reasonable" responsibility. That is no reason for not putting in the word. However, we have now taken 22 minutes on this amendment so I suppose there must be a degree of doubt. Perhaps the Minister will tell me and the Committee whether what the Government really intend is that paragraph (d) should be read as meaning that the general principle is that consumers should take responsibility for their decisions even in circumstances in which it is quite unreasonable to expect them to do so.
	I cannot believe that the Government intend that in the light of paragraph (c), which draws attention to,
	"the needs that consumers may have for advice and accurate information".
	That is why I lay stress on the context. As far as concerns the amendment of the noble Baroness, Lady Turner, I would respectfully suggest that, while it may be highly admirable and desirable in principle, the actual wording needs to be looked at rather more carefully. I am troubled by the words "as far as possible". It certainly would be possible to undertake an enormous number of activities in order to ensure that a proposed product was suitable for the consumer, but it would be wholly unreasonable to expect it to be done. I suggest that such words as "as far as is reasonably practicable" or "in all the circumstances" should be inserted and that the amendment as currently drafted should not be accepted.

Lord Blackwell: Despite the thoroughly reasonable arguments that have been put forward for the amendments, I would be worried about either reaching the statute book. I say that because the cost of compliance and the cost of providing information and advice on many of these products have been so great as to make it uneconomic to sell them to the consumers who need them. There is no regulation that does not impose costs and, ultimately, costs on consumers. The danger of the amendments is that they would build in another degree of caution and another degree of prejudice which would require more compliance costs around the sale of products, which again would make them uneconomic in major parts of the market.
	We should bear in mind the development of some of the new channels and the Internet selling of these products which will, in an ideal world, enable them to be sold much more effectively with adequate information. In many cases there will be tools which people can use to reach better decisions than may have been possible in the past without the provider having to be involved in any face-to-face discussion or fact finding with the consumer. Building anything into the Bill that provides a barrier to such cost-effective channels developing in the future is likely to work against the interests of consumers. Paragraph (c) of subsection (2), which refers to,
	"the needs that consumers may have for advice and accurate information",
	must be taken into account. To my mind, that says it all. The caveat emptor provision which follows is then a healthy rejoinder which ensures that we do not go too far overboard in the balance to which many Members of the Committee have referred.

Lord Alexander of Weedon: Before my noble friend sits down, I want to understand what he is saying with regard to the amendment of the noble Baroness, Lady Turner. I understand his point that sales may be effected on the Internet. However, does he cavil with the fact that even on the Internet the seller should have a responsibility for ensuring that, as far as is reasonably practicable, the product should be suitable for the consumer?

Lord Blackwell: I am grateful for that question. The wording as it stands suggests to me that the seller has some obligation to understand the particular circumstances of the consumer and to ensure that the product is tailored to that consumer whereas the circumstances I envisage are where the seller may ultimately know nothing about the consumer. He may provide tools that the consumer can use but there is nothing in what he does that ensures that the product is suitable for that consumer. That is up to the consumer to determine, based on the information provided. I may have misunderstood the implications of the wording, but that is my fear about the wording as it stands.

Lord Monson: Perhaps I may suggest that the parallel which some Members of the Committee have tried to draw between investing £100 in a microwave and £100 in a unit trust is an inaccurate one. The only legal duty on the seller of a microwave is to ensure that the microwave itself functions properly at the time of sale, that it is properly insulated, and so on. The seller does not have to ask the purchaser whether he or she has a 13 amp socket fitted in his or her kitchen or whether his or her baking dishes fit into the microwave. But that is what in essence the seller of the unit trust would have to do if the second of the amendments were to be accepted.

Lord Walker of Worcester: I wish to express concern about the amendment proposed by the noble Lord, Lord Borrie. I hesitate to do so because we are neighbours in the same village in Worcestershire and divisiveness in one small village might cause concern. There is a difficulty when a word like "reasonable" is introduced. No noble Lord who has spoken in favour of it has defined what "reasonable" means. Those who would be pleased by the insertion of the amendment are the lawyers. The amendment would give enormous scope for legal disagreement about what was reasonable and not reasonable. Perhaps I may also say that from the Government's point of view it gives enormous scope for further amendments. If the Minister decides that he cannot reject the word "reasonable" because that would be unreasonable, we could insert the word "reasonable" into virtually every clause of the Bill and into every other piece of government legislation. The noble Lord would have the same problem.

Lord McIntosh of Haringey: Without anticipating the end of the debate on this amendment, I must inform the noble Lord, Lord Walker of Worcester, that later I shall move a number of amendments which seek to insert "reasonable" into the Bill.

Lord Stewartby: I have some sympathy with the general purport of the amendments. While I note the observations of the noble and learned Lord, Lord Donaldson, about the wording of Amendment No. 60, I believe that the idea behind it has merit and hope that the Government will respond to it. Like my noble friend Lord Walker of Worcester, I am a little concerned about introducing "reasonable" into subsection (2)(d). I am not sure to what "reasonable" is related. Is it related to the care that the consumer takes or the behaviour of other parties in relation to the other sub-paragraphs in the subsection? I hope that the noble and learned Lord is correct in saying that it is not necessary. I believe that some confusion may be caused if the four plain statements that we now see must be looked at according to the actions of the various parties involved. I believe that there is merit in having a fairly plain statement of the matters to which the authority must have regard, provided the Government can assure the Committee that a degree of reasonableness is a thread that runs through all of them.

Lord Elton: The great danger in arriving late is that the point one raises may already have been taken in the debate. The amendment of the noble Baroness appears to be much more appropriate to people who buy life assurance than, say, stocks and shares. It is rather extraordinary that the same degree of responsibility should be placed on the sellers of both when in one case it is clearly very relevant and in the other it is not.

Lord Kingsland: In approaching the amendment moved by the noble Lord, Lord Borrie, it is important to recognise that Clause 5(2)(d) does not describe the legal position of the provider in relation to a particular transaction. It is one of four considerations to which the authority must have regard in determining the degree of protection which is appropriate to the consumer. The first three characteristics lean very heavily in favour of looking carefully not only at the particular type of instrument involved but also the susceptibility of the consumer. Paragraphs (a), (b) and (c) lean heavily in the direction of the consumer and it is not surprising, therefore, that the Government felt it necessary to reintroduce a balancing expression in paragraph (d) of the kind now before the Committee.
	I have not yet heard the Minister. Perhaps he will support the amendment moved by his noble friend Lord Borrie, in which case I shall find myself in disagreement with the Government. However, I support the text of Clause 5(2)(d) of the Bill. I am further reinforced in that view by sharing, with great respect, the approach of the noble and learned Lord, Lord Donaldson, to the construction of the expression itself. As to the amendment in the name of the noble Baroness, Lady Turner of Camden, I believe that everything that she seeks in her new paragraph (e) is already provided for in Clause 5(2)(a) to (c). Therefore, I respectfully suggest to the noble Baroness that her amendment is otiose.

Lord McIntosh of Haringey: I like to hear the arguments before I respond, and I hope that the Committee does not disagree with that. As has been said, it is a matter of balance. I am urged to go a little bit in one direction and then in another; or, as the noble Lord, Lord Kingsland, suggested, to stand firm on the text of the Bill. I start by reminding the Committee of the recommendation of the Joint Committee:
	"We recommend that the principle of caveat emptor should feature in the Bill; but that it should be redrafted in such a way that it could not be used to negate the consumer protection objective and excuse exploitation of sections of the general public".
	Our response to that was to amend Clause 5 to require the FSA to take into account the need for consumers to have advice and accurate information. I believe that, as amended, the clause achieves the right balance between what is reasonable for consumers to expect and their own responsibility, to which the noble Lord, Lord Jenkin, referred.
	Consumer protection is an important objective, and I am sympathetic to the intentions behind the amendments. We do not wish to place an unreasonable burden on consumers. It is certainly not our intention that firms should be allowed to mis-sell products, but we believe that the amendments are unnecessary. After all, instead of a variety of schemes we have introduced a single compensation scheme, the financial services compensation scheme, and single ombudsmen schemes. Clause 2 sets the FSA the regulatory objective to protect consumers. The general rule-making power in Clause 129 is aimed directly at the protection of consumers' interests, and we must look at all of the provisions of Clause 5 against that background.
	Amendment No. 59 is designed to qualify the principle that consumers should take responsibility for their actions, but Clause 5 sets out matters to which the FSA should have regard. We must look at the whole of the provision, which includes: the differing degrees of risk involved in different kinds of investment; the differing degrees of expertise and experience that different consumers may have; the needs that consumers may have for advice and accurate information; and the general principle that they should take responsibility for their decisions. The consumer protection objective is already designed to ensure that the FSA must take account of the fact that some consumers should be expected to take more responsibility for their actions than others. The effect of the amendment may be to undermine that balance. The insertion of "reasonable" as proposed could imply that the same test should apply to all consumers, which would run counter to the idea that regard should also be had to the other matters in Clause 5(2).
	The noble and learned Lord, Lord Donaldson, is correct in saying that by leaving out "reasonable" we certainly do not mean that consumers should take unreasonable responsibility. I am sure the noble and learned Lord agrees that no court would suggest otherwise. Imagine if we put in "reasonable" elsewhere. The authority would have to have regard to the differing degrees of reasonable risk involved in different kinds of investment; the differing degrees of reasonable experience and expertise; and the needs that consumers may have for reasonable advice and reasonably accurate information. One could go on for ever inserting "reasonable" in clauses of this kind without adding very much. We believe that, taking the clause as a whole, we have achieved the right balance.
	The same point applies to Amendment No. 60, which provides that the FSA should take account of the responsibility of the seller for ensuring that a product is suitable for the consumer. Of course we do not want the mis-selling scandals that have occurred in the past. However, the Bill gives the FSA adequate powers to prevent the mis-selling of financial products. The clause explicitly requires the FSA to take account of the experience and expertise of consumers and their need for accurate information. With this amendment, we could end up with the FSA attempting to prevent an experienced consumer, who had made an informed decision on the basis of all the relevant information, from exercising his right to choose how to invest his money. I do not believe that it would be right for the FSA to have such an objective. While we support the thinking behind the amendments, we do not believe that they add positively to the Bill.

Lord Borrie: I am grateful to all Members of the Committee who have taken part in this somewhat lengthy debate--in particular the noble Lord, Lord Sharman, the noble Lord, Lord Alexander of Weedon, and my noble friend Lord Faulkner of Worcester--who expressed support.
	I was intrigued by the remarks of the noble and learned Lord, Lord Donaldson of Lymington. Most particularly, I listened to see whether the Minister endorsed those statements. If he had done so, the rule of Pepper v. Hart would come into play and I should be extremely happy. The curious factor about Pepper v. Hart is that although the noble and learned Lord the former Master of the Rolls has given a view in this House, it is not that which apparently matters; it is whether the Minister accepts that interpretation.
	I shall read the Minister's words with great care to see whether he endorsed to a degree what the noble and learned Lord said. In the meantime, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.
	[Amendments Nos. 60 and 61 not moved.]

Lord McIntosh of Haringey: moved Amendment No. 62:
	Page 3, line 16, leave out from ("persons") to end of line 21 and insert ("--
	(a) who are consumers for the purposes of section 129; or
	(b) who, in relation to regulated activities carried on otherwise than by authorised persons, would be consumers for those purposes if the activities were carried on by authorised persons.").

Lord McIntosh of Haringey: In moving the amendment, I speak also to Amendments Nos. 75, 76, 88, 125, 227, 229, 229A (as an amendment to Amendment No. 229), 240, 241, 261 and 262.
	All these amendments are intended to achieve greater consistency in references to "consumer" in the Bill. Amendments Nos. 227 and 229 put the core definition of a consumer in Clause 129; and they ensure that those using the services offered by the appointed representatives of authorised persons and by trustees, and those who "deal" with authorised persons, are within this definition, thereby eliminating potential gaps in coverage. The amendments also give appropriate protection to people using the services of non-authorised persons who are nevertheless carrying on regulated activities--some lawfully, some unlawfully--such as Lloyd's underwriters, recognised exchanges and clearing houses, and persons acting in contravention of the general prohibition. These amendments fulfil a commitment given in another place to review the provisions dealing with consumers.
	I am grateful to the noble Lord, Lord Hunt, for tabling Amendment No. 229A which seeks to restrict the core definition of a consumer in Clause 129. If I may anticipate what he will say, his concern is that the definition of "consumer" is too wide and that this will mean the FSA trying to make wide and detailed rules to protect consumers who stand some considerable distance from the use of financial services.
	I believe that that concern would be unfounded. I should make clear, first, that government Amendment No. 229 does not introduce the provision which he seeks to remove. The provision is already within Clause 129. Its purpose is to ensure that the FSA is not prevented from affording certain types of consumers, such as trust beneficiaries, protection just because of the particular arrangements surrounding the use of financial services on behalf of the trust.
	It is misleading to attempt to analyse this one particular provision in isolation. The provisions relating to the interests and protection of consumers need to be viewed within the context of the Bill as a whole. The FSA must exercise its functions in the light of the regulatory principles set out in Clause 2. These include the need to use its resources in the most economic and efficient way, and the desirability of facilitating competition. Both those principles apply important balances to the scope of FSA regulation. However, the key principle in this context--it is also set out in Clause 2--is that regulation must be proportionate to the benefit. Clause 5 makes it clear that the FSA should seek to secure the appropriate degree of protection.
	It is clear from the Bill that the FSA must exercise its powers and seek to meet its objectives in a balanced, proportionate and appropriate way. It is therefore unnecessary to amend the Bill as proposed.
	Perhaps I may say a word about the individual amendments. The main amendments are Amendments Nos. 227 and 229. Clause 129 gives the FSA its general rule-making power. As amended, the clause will be clear that this power is to be used to protect the interests of "consumers". It will now be clear that this category includes people who use the services of appointed representatives or who "deal" with authorised persons carrying on regulated activities, for example by buying shares from a market dealer. It may seem self evident that people like that are "consumers" of authorised persons, but it is necessary to clear the issue up because it could be argued that they do not use the services of an authorised person which could mean that they were denied protection.
	The other amendments are largely designed to bring all the various provisions into line with each other--generally by replacing individual definitions of the term with cross-references to Clause 129. The amendments to Clause 319 (Amendments Nos. 261 and 262) are slightly different in that they deal with a more limited group of people--clients of professional firms--but they bring the definition of a "client" into line with that of a "consumer" where the two overlap.
	The amendments to Clauses 5, 9 and 12 refer to those people using the services of non-authorised persons. This brings them into the frame for the purposes of the provisions of the Bill dealing with the FSA's objective of protection for consumers, the setting up of the consumer panel, and the Treasury's ability to initiate independent inquiries into the effectiveness of regulation. I hope that it will be agreed that these are an appropriate response to the debate which took place in another place. I beg to move.

Lord Jenkin of Roding: During debate of an earlier government amendment, I asked how many more amendments we could expect on the Marshalled List before we completed the Committee stage of the Bill. I do not think that I received an answer. Perhaps this is another occasion on which I may ask.

Lord McIntosh of Haringey: The noble Lord is right. I did not answer; I am sorry. We said at Second Reading that we might have between 500 and 600 amendments in Committee. The number will be somewhat lower. The good reason is that we have found ways of turning the figure of between 500 and 600 amendments into a lower number. The bad reason is that some of the amendments are still not ready and will have to be laid at Report stage. It is a serious burden for which we are deeply apologetic.

Lord Stewartby: Is there a special reason for having this definition of "consumer" just for the purposes of Clause 129?

Lord McIntosh of Haringey: It is not just for the purposes of Clause 129. If the noble Lord looks at the other amendments, there are differences but they are all based on the core of the definition which is to be found in Amendment No. 229 in Clause 129.

Lord Hunt of Wirral: I thank the Minister for having already answered the point that I was about to make. In the light of his answer, I am a little concerned about the extension of the definition to persons who have rights or interests which may be adversely affected by the use of services by other persons. That broadens the definition by moving away from some sort of causation to a general adverse effect. That causes me concern. It may well have unintended impact. It may make it necessary for the FSA to broaden the scope of the ombudsman scheme beyond complainants with a contractual customer relationship with the authorised firm to include all third parties such as third parties under motor policies following road traffic accidents. It would extend protection to third parties injured under liability policies. It might extend the definition of customer to those adversely affected by a polluting incident.
	I mention those examples. I do not wish to press the point now but ask the Minister to reflect on that aspect. I can supply further details in due course.

Lord McIntosh of Haringey: The noble Lord was good enough to write giving me notice that he would put down the amendment. However, we saw the amendment only this morning. It is a complicated issue. Perhaps he will allow me to write to him in more detail with the benefit of more reflection.

Lord Peston: I have lectured on consumer theory for about 40 years and believed that I understood what a consumer was. I thought that the Bill as drafted was clear. I do not understand the amendments; they are supposed to improve the Bill. The Bill states what a consumer is. I nod my head and agree with it. Paragraph (b) refers to other people who may be acting in ways for a consumer. That is perfectly clear to me. I have no difficulty with the Bill.
	However, I find the amendment completely incomprehensible. With no disrespect to my noble friend I find the Minister's explanation even more incomprehensible. I cannot understand what is wrong with the Bill as drafted.
	I do not want to prolong the debate, but as the noble Lord, Lord Hunt, asked my noble friend to think again, could he persuade those who are advising him to do so, too, in case they got it right the first time?

Lord McIntosh of Haringey: Without the amendments, there are different definitions of "consumer" in different parts of the Bill. I do not know where my noble friend looked, but he would have found different definitions in different places.
	In Amendment No. 229, the core amendment in the group, the bulk of the explanation is not about who a consumer is--he is a user of services, which no doubt is what my noble friend has been saying for 40 years--but about whose services he uses. As the Bill is all about authorised and unauthorised persons, trustees and people carrying on financial services as representatives of someone else, it is important to be precise about the definition of the providers of the services. That is why, unfortunately, there are still differences between the definition of "consumer" in different parts of the Bill. At least they are all referenced to and rooted in Amendment No. 229.

Lord Elton: I am sure that we all recognise the Government's difficulty when faced with amendments which they have only recently seen. The Minister will realise that from time to time Members of the Committee are in a similar difficulty. Therefore, he will forgive me if I ask whether in advance of his correspondence he could expand on his reply to my noble friend Lord Hunt. Presumably, the issue is simple for him to explain, but not so simple for me to understand.
	As regards Amendment No. 229, I understand the direct links and interests held by persons,
	"who have rights or interests which ... are derived from, or otherwise attributable to ... the use of services by other persons".
	That is a clear link. However, I cannot get my mind around the link, and therefore the right to protection, to someone whose interests may be merely adversely affected by a person with such rights. It seems to me that the world is full of people who may be adversely affected by my decision to buy, sell or insure something, but that can be of no possible interest to the regulator or impose any moral obligation on the person making the sale.
	I am speaking at leisure in the hope that some succour might be granted to the Minister, but it appears not. Therefore, I shall bring my remarks to a conclusion.

Lord McIntosh of Haringey: I am grateful to the noble Lord, Lord Elton, for his consideration. Rather than attempt to reach a final conclusion on an amendment that has been available for only a few hours, it is better to include the noble Lord in my correspondence with the noble Lord, Lord Hunt. Indeed, if a meeting is desirable, I shall be only too happy to meet them and anyone else concerned.

Lord Elton: I am most grateful for the offer.

Lord Kingsland: As the Minister proposed to take my noble friend's amendment away and subject it to a certain degree of textual exegesis, perhaps I may add one or two reflections from the Front Bench on Amendment No. 229. It adds three subsections to Clause 129. The government amendments propose that the definition of "consumer" in Clauses 5(3), 9(7) and 12(5) would be replaced by reference to the definition in new subsection (7) in Clause 129.
	We are happy with new subsection (8) and, I think, new subsection (9), although it may need consideration should occupational pensions be brought within the scope of the legislation. However, we share the concern of my noble friend Lord Hunt about the effect of new subsection (7)(b)(ii). That paragraph extends the definition to persons,
	"who have rights or interests which ... may be adversely affected by, the use of any such services by other persons".
	In the context of Clause 129, which deals with the scope of the authority's rule-making powers, such a wide-ranging definition is perhaps understandable. But our concern is that it could extend the consumer protection objective in unpredictable ways. For example, if a company, using the services of an authorised firm in speculative dealing, loses money and has to lay off employees, would the employees be persons whose interest had been adversely affected by their employer's use of the authorised firm's services? If so, it would seem that the FSA might need to take such interests into account when determining how the consumer protection objective worked. Can that really be the Government's intended result?
	Surely, the real problem is that there is no nexus, no contact, between authorised firms and the persons covered by Clause 129(7)(b)(ii). For example, the new definition of "consumer" is used in Clause 177(2)(b), which deals with the approval requirements which the FSA must assess when considering whether to object to the acquisition of control of an authorised firm. It would seem that under the definition in Clause 129(7)(b)(ii), the authority is obliged to consider the position of persons who have rights or interests which may be adversely affected by the use by other persons of the service which the authorised firm provides. It is not apparent to us how the authority can do that. Nevertheless, it seems that it would be obliged to do so because Clause 177(1) states that the FSA must be,
	"satisfied that the approval requirements are met".
	There is nothing between us on seeking to have a common definition of "consumer" which covers the Bill, but it is in the interests of us all to ensure that the clause does not have the unintended effects that we believe that it might have. We do not believe that the authority would be in a position successfully to deal with transactions in those unexpected situations.

Lord McIntosh of Haringey: I hope that I can reassure the noble Lord, Lord Kingsland, who asks why we need a reference to persons,
	"who have rights or interests which ... may be adversely affected by, the use of any such services by other persons".
	Perhaps I may give an example. Trust beneficiaries and members of a pension scheme would not otherwise be protected where somebody apart from themselves--namely, the trustees--had used financial services offered by a third party. In that case, the beneficiaries' rights or interests continue to derive from the trust and not from the use of the services. Clearly, it would be wrong to deny them protection. These people would not necessarily be protected under the new subsection (8) of Clause 129, which is designed to protect consumers where trustees themselves are providing the service.
	I realise that giving one example might not satisfy the noble Lord on the general principle, but I repeat what I said to the noble Lord, Lord Hunt: we shall look again at the scope of Clause 129 to see whether there is a danger that it might be interpreted too widely. We shall consult before deciding what to do, if anything, at a later stage.

Lord Kingsland: I am grateful to the Minister and I am sure that that is an appropriate point to leave the matter. Unless I misunderstood him, the example he gave to me concerned new subsection (8) and not new subsection (7). I am content to leave the matter there and to return to it at the Report stage.

Lord McIntosh of Haringey: It referred to new subsection (8), but it was about new subsection (7).

On Question, amendment agreed to.
	Clause 5, as amended, agreed to.
	Clause 6 [The reduction of financial crime]:
	[Amendments Nos. 63 to 69 not moved.]
	Clause 6 agreed to.
	Clause 7 [The Authority's general duty to consult]:

Lord Sharman: moved Amendment No. 70:
	Page 4, line 5, leave out ("practitioners and consumers") and insert ("authorised persons, consumers and other practitioners").

Lord Sharman: In moving Amendment No. 70, I wish to speak also to Amendment No. 72. This group consists very much of probing amendments, designed to establish in a broad term what comprises "practitioners" and the manner of their consultation.
	As it stands, the Bill requires the FSA to consult only with practitioners and consumers. The term "consumers" is defined for these purposes in Clause 9(7), but the term "practitioners" is not defined and no reference is made to the categories of practitioners or the practitioner panel as set out in Clause 8(5). In any event, I believe that the issue here is that the FSA should be seen to be consulting as widely as possible and should be required to have in place effective arrangements for consulting all relevant parties, including other professionals; for example, the Law Society company law committee, and so on.
	In terms of the current definitions within the Bill, it is also unclear to me whether the status of "representing" is a formal requirement--for example, for a person nominated by the recognised investment exchange to represent its interests on the practitioner panel--or whether it is a less formal arrangement. I believe that it should also be noted that, under the current definition, the persons whom the authority may appoint to the practitioner panel under Clause 8(5) would not necessarily include members of professions who would be subject to regulation under Part XX of the Bill, since they are not authorised position persons, they would not be representing authorised persons, they are not persons representing recognised investment exchanges, and they are not persons representing recognised clearing houses.
	I believe that it is important that we should know what the Government have in mind in terms of "practitioners" in the broadest sense. Then we can deal quite properly with how they should be consulted. I beg to move.

Lord Saatchi: I rise to speak to Amendment No. 73, which is intended to ensure that members of the practitioner panel should feel free to report in an independent and, if necessary, critical manner about any area with which they are concerned. We must remember that, as it stands, all the members of the panel are appointed by the FSA with the exception of the chairman, whose appointment and dismissal are subject to Treasury approval.
	This amendment would require that, before the FSA appoints any person to the practitioner panel, it must consult others who represent the interests of practitioners with a view to identifying suitable candidates for appointment. I do not believe that the amendment imposes on the FSA too onerous an obligation; only one to consult such persons who represent the interests of professions as the FSA considers appropriate. The amendment would go some way to ensuring that the panels have independence and can be a force to be reckoned with.

Lord Elton: Perhaps I may speak to Amendment No. 74B, which is grouped with these amendments. In introducing the group, the noble Lord, Lord Sharman, spoke of the need to define the practitioners. I believe that my amendment fits more comfortably with the amendment of my noble friend Lord Saatchi, to which he has just spoken. That amendment seeks to ensure that all practitioners, however defined, are embraced in the consultative and advisory process. Accordingly, I sought to draft words which would ensure that the whole of the field of market practitioners was in some way embraced in the panel.
	In discussion with the BBA, it has been drawn to my attention that, by referring to those people as "representing" parts of the market, the wording of my amendment might encourage them to believe that they had some sort of constitution which they must represent in competition with other members of the panel. That, of course, is very far from what I intended. I should say that this amendment is drafted purely as a probing amendment to discover how the Government expect it to work. However, if it seemed necessary to do anything at a later stage, I would prefer wording which excluded the constituency element but which might ensure that individuals appointed between them have experience of each of the activities listed in Part I of Schedule 2, which is where the definition of where those people are drawn from lies.
	The important point is that the panel should not be a "pick-and-mix" selection by the authority. The authority should be required to produce a mix which is genuinely representative of practitioners as a whole and which cannot be skewed in any one particular way to suit the inclinations of the authority at any particular time.

Lord McIntosh of Haringey: With these amendments, we turn to the questions of how the practitioners panel should be appointed and the interests which it might represent. It is important to understand the way in which the arrangements for the practitioner panel are to work. The purpose of the panel is not to create a super-trade association for the industry or, indeed, a super-trade union to represent the interests of those who work in the industry. Indeed, if we tried to do that, I believe that we would arouse considerable antagonism both from, for example, the British Bankers' Association and from the banking and insurance trade unions. Neither is it the case that the consumer panel is intended to be a loud but single voice for consumers. Again, if we tried to do that we might arouse the antagonism of the National Consumer Council and the Consumers' Association.
	The role of the practitioner panel is to enable the authority to have access to dedicated expertise to improve its ability to perform the functions conferred on it by the Bill. I shall not rehearse at length the arguments about what the panels should do. That is the subject of another group of amendments. However, it is enough to say that the same considerations apply in determining the role of the panels as apply when we consider who they are to represent and how the members are to be appointed.
	I turn, first, to the representation on the panel. Clause 8(5) sets out certain minimum requirements; that is, individuals who are authorised persons, representatives of authorised persons, recognised investment exchanges and clearing houses. That list is indicative; it is not intended to be inclusive.
	Perhaps I may first explain the distinction between the classes of person in paragraphs (a) and (b). The first category is aimed at ensuring that sole traders will be represented; that is, they will be authorised in their own right. The second is aimed primarily at giving a voice to incorporated firms. Of course, a corporate bank, insurance company or securities firm cannot itself be a member of the panel. Therefore, the body must be represented perhaps by a director of such a company, just as the chairman of the panel is the chairman of Schroder. However, the wording in paragraph (b) would already cover authorised persons who are represented through trade associations.
	The other two categories in Clause 8(5) make express reference to recognised bodies under Part XVIII of the Bill. Those bodies need to be represented in their own right because of the special role that they play--distinct from the authorised community--in the markets for investments, using investments in the sense that they are used in the Financial Services Act 1986.
	Amendments Nos. 70 and 72 would add to the categories of persons who must be represented. A new category introduced by Amendment No. 72 is approved persons, such as certain employees and directors under Part V of the Bill. I must say that I do not see appointments to the practitioner panel as being made on a self-interest basis; on the contrary, I rather think that membership of the panel is a public service. Panel members are not paid at the moment. Therefore, if a director of a bank is appointed, he may well be appointed on the basis of the contribution he has to make to the panel.
	Secondly, approved persons are in any event likely to be represented by default, since we would expect many, if not all, of the appointees to the panel to be persons who perform functions that we expect to be controlled functions for the purposes of Part V of the Bill. So most members of the panel will anyway be approved persons in their own right. That is certainly the case on the basis of the panel's current membership. It is the case also that, as representatives of firms employing approved persons, they will be able to consider relevant issues from an appropriately informed perspective.
	Thirdly, it is important to remember also that the authority's legislative powers and much of the work of the panel will focus on the activities of authorised persons; that is, the firms and the regulatory implications of the authority's action on those firms. The powers in relation to approved persons form a relatively minor part of the total area of responsibility.
	Another suggested addition is such other bodies as the authority considers appropriate. The clause as drafted already allows that since it specifies only the requirements imposed on the authority, not the powers which the authority has in any event.
	Amendment No. 74B in the name of the noble Lord, Lord Elton, also seeks to specify the persons who should be represented on the panel, but instead of referring to them in terms of whether they are authorised, approved and so on, he sets out a list on sectoral lines. The amendment may be defective in any event since I should have thought that the different types of investment were the issue and not the activities which a person carries on in relation to that investment. However, it starts to create a potentially long list of people who would need to be represented on the panel.
	We believe that it is unnecessary and undesirable to be too prescriptive about the constitution of the panel. Our approach must be to specify certain minimum categories of persons who we believe must be represented if the panel is to meet the requirements under Clauses 7 and 8. Clause 8 does not exclude the possibility of other persons being members; it simply does not require them to be. One reason for our approach is that we wish members of the panel, once appointed, to act objectively on behalf of practitioners as a whole and not to represent the interests of particular individuals, companies or industries.
	I turn now to Amendment No. 73 spoken to by the noble Lord, Lord Saatchi. Again, to a degree, the appropriateness of an amendment of this kind depends on the purpose for which the panel is established. Certainly, where the intention is to provide the industry with a voice from which it can make its views known to the authority, the amendment makes perfect sense. But it is not for the authority to create and fund a trade association. The requirements for the panel are being introduced to ensure that the authority has access to the professional expertise it needs to be able to carry out its functions effectively and efficiently.
	Of course, I do not rule out the possibility of enabling the authority to seek nominations for candidates to the panel from industry sources. It has done that in the past. The Bill will not prevent it from doing so in the future. But that is a decision for the authority. It should not feel obliged to accept candidates forced upon it by the industry. It may feel that it would be appropriate to adopt a Nolan approach to appointments, as I believe it has done in regard to the consumer panel.
	I hope that that gives Members of the Committee who have tabled amendments some reassurance about the practitioner panel and, indeed, the consumer panel when we come to it.

Lord Elton: I am obliged to the Minister for what he said but I am not altogether convinced by it.
	He said that the introduction of activities as the criteria on which people were recruited to the panel would confuse matters. He said that people in fact should be recruited from certain categories. But my narrow experience of operation in this field is that people of those few categories may become involved in widely different and highly complex activities.
	The advice of an authorised person on an activity in which he has taken no previous part, and a highly technical one at that, may be insufficient, absent or flawed. With my amendment I was seeking to elicit an explanation from the Government as to how it would be incumbent on the authority to make sure that those advising it on operations of different kinds, within the highly variegated field which it is to regulate, had personal knowledge of each of those fields.
	I suppose that if the answer is that that cannot be guaranteed, then I ask how, in that case, the deficiency may be made good by other means.

Lord McIntosh of Haringey: It certainly cannot be guaranteed because Part I of Schedule 2 contains a very long list indeed. That would mean that we should have a very large panel. I am sure that the noble Lord remembers that his government used to set great store by the argument that bodies of people meeting together should be as small as possible. We used to have terrific arguments about the size of committees, panels and bodies of that kind.
	We could not possibly cover all of them. We are slicing it in the other direction: slicing it by those activities which cross-cut the sectoral description which is in Part I of Schedule 2. We do not wish to be entirely prescriptive and so it is for the authority to make its judgment about how to cover the activities.

Lord Elton: I am handicapped by a momentary lack of attention earlier in the day when the noble Lord gave the Committee the very important definition of the italicised words in the middle of the page. There are only 8 chapeaux in Part I of the schedule and perhaps I should be referring only to those wearing those eight hats.
	The noble Lord's answer begins to throw an interesting light on how the panel is expected to work. It will work by meeting together. Another way of using panels is to bring forward selected people from a panel to give advice on particular issues. I hope that at this or a subsequent stage, we shall be told whether the advice of the panel is always to be tendered corporately; whether it is to be sought individually or in parts. All that will be a matter of great interest to practitioners. If that information is not forthcoming now, I hope that it will be forthcoming before too long.

Lord McIntosh of Haringey: I shall answer that point now. It is for the panel to decide how it tenders its advice, whether corporately or individually.

Lord Elton: Then it is for the panel, is it not, to decide whether or not the number of categories which I have suggested is too many? If the number of chapeaux means a very large committee, then it will be constrained to act through sub-committees, as a later amendment of mine suggests that it should.
	It seems that we are perhaps at a disadvantage in trying to determine the composition of this panel if we do not know how it is to work.

Lord McIntosh of Haringey: I am not trying to determine the composition of the panel. I am saying that, fundamentally, it is a matter for the authority. The control, independent of the authority, which is contained in the clause, is that the appointment of the chairman must be with the approval of the Treasury. But the composition, size, origin and destination of the individual members of the panel is a matter for the authority. What I am trying to say--and it should apply to all the amendments and not merely the one in the name of the noble Lord, Lord Elton--is that we must not be too prescriptive. The panel is there to help. It is not part of the independent inspection process which plays such a prominent part in the rest of the Bill.

Lord Peston: I was hoping to be helpful. One difficulty that arises is that Clause 7 includes practitioners and consumers as though they are on a par, when, in fact, the two panels are completely different. One can easily be misled simply by starting with Clause 7 and thinking that other things should be added to Clause 7.
	However, I concentrate on Clause 8. Will my noble friend confirm that the role of the practitioner panel is to give expert advice? It is not a representative body in any sense, whereas in Clause 9 there is a body which may well be representative. However, in Clause 8 we are looking for expert advice of the kind we are all used to; namely, someone who knows about this or that part of the market will say to the authority, "You are doing that and, if you really understood what you were doing, you just would not do it. You do not understand this or that point because you do not have the experience", and so on.
	I could easily put up a case for not having a practitioner panel at all. In fact, listening to the remarks just made, it seems to me that the authority simply should be asked to obtain expert advice as and when it needs it. I believe that my noble friend said that that is what it will do in any event, if such advice were not available through the practitioner panel. But if there is going to be a practitioner panel, will my noble friend at least confirm that its role will be simply either to be asked, "What do you think of what we are doing?", or, perhaps more importantly, to say, "Oh, we see what you are doing and you're stupid; you shouldn't be doing it"; or, "We are not the right people for this. We have a sense that it is not right, but go and ask X who knows about these things"?
	I see all that as the role of the practitioner panel, if there is to be one, or as the role of the authority, which I hope we can trust to do its job correctly if we suddenly decide to save some money by not having a practitioner panel. It is all to do with obtaining good expert advice. Simply trying to advise noble Lords of what we should not do is to fall into the trap of assuming that Clauses 8 and 9 are on a par because Clause 9 is about representation and representing interests, whereas Clause 8 should not remotely be about representation, interests, or anything of the sort. It should simply be about expertise.

Lord Jenkin of Roding: Before the noble Lord sits down, the first subsection of Clause 8 states that it shall represent interests. Therefore, I really do not understand what the noble Lord is saying. The practitioner body is surely intended to be as much a representative body as the consumer panel.

The Earl of Home: I find myself, unusually, in agreement with quite a lot of what the noble Lord, Lord Peston, says. I accept that the Minister does not want to be too prescriptive about the number of people on the panel. But will he tell us what the minimum number on the panel must be? When advice is sought, can there be a panel of one? What is a panel quorate going to be? How many representatives of those people who are all listed in the plural under the existing drafting will be required to make up a panel before its advice can be taken seriously?

Lord McIntosh of Haringey: The panel is 12-strong at present. The constraint on the size and membership of the panel is in Clause 7, which states,
	"The Authority must make and maintain effective arrangements for consulting practitioners and consumers on the extent to which its general policies and practices"--
	that is, what it does--
	"are consistent with its general duties under section 2".
	If it was seriously skewed in favour of particular sectors, or indeed, missed out certain absolutely essential interests, one could doubt whether it was effective. Beyond saying that it must be effective, the Bill does not seek to prescribe its size, composition, times of meeting or any of those things which a panel might do. We should be accused of over-regulating by far if we were to seek to make the kind of provision implied in some of the comments noble Lords are making.

Lord Jenkin of Roding: Will the Minister make it perfectly clear to the noble Lord, Lord Peston, that the panel is indeed intended to represent the interests of practitioners? It is not there simply as a body to be consulted. It is perfectly proper that it should say, "We don't like this and we don't like the way you're doing it. Will you now make changes?". In a sense, it is a hangover from the earlier system of what was called, quite wrongly, "self-regulation". It was never self-regulation. It was practitioner regulation. The practitioner panel is the element of that which remains; of the practitioners being in a position to make effective representations--and to report outside if necessary and to gain support for their views--against the way in which the Financial Services Authority is running its business. Is that not right?

Lord McIntosh of Haringey: I do not accept the noble Lord's historical description. I am not saying that he is right about why the practitioner panel was set up, but he is certainly right in saying that Clause 8(1) states that the practitioner panel represents the interests of practitioners and that Clause 9(1) states that the consumer panel represents the interests of consumers.

Lord Elton: In that case, the Minister must surely recognise that, if those people are to represent the interests of a regulated industry, there will unavoidably be times when the industry feels that it is being unfairly constrained, trammelled, or treated and it will be at odds with the authority and pass complaints and advice to the authority. I then ask your Lordships whether it is altogether sufficient to leave it to the authority, which may receive perhaps quite valid and justified complaints, to be entirely in control--except for the need for the Treasury's approval of the appointment or dismissal of the chairman--of the way in which the panel operates; and, it would seem, the extent to which it can satisfy the requirements of listening to its advice? Should there not be something more prescriptive on the statute book after all?

Lord McIntosh of Haringey: We are back to square one. The British Bankers' Association will still exist. If it feels that it is being traduced or badly treated, it will say so. The panel is not a trade association; that is not its job. Its job is to provide effective arrangements for consulting practitioners and consumers on the extent to which what the authority does--the "general policies and practices"--is consistent with the general duties under Clause 2. That is not the only way in which practitioners abut on the work of the authority. The trade would not like it if it were.

Lord Elton: That is for later discovery, but it seems that the Minister has entirely endorsed what my noble friend Lord Jenkin of Roding said; that the panel is a representative body. Indeed, the Bill states that it is,
	"a panel of persons ... to represent the interests of practitioners".
	If practitioners see that their interests are being ridden over roughshod, I presume that it is their job to say so. If they are to say so effectively, they must have effective means of expressing that dissatisfaction. The simple question I am asking the Minister is not whether I am right in those assumptions; I cannot see how I can be wrong. I am asking him whether it is altogether prudent to leave the doorway through which representations come from the panel to the authority entirely under the authority's control.

Lord McIntosh of Haringey: We are discussing the membership of the panel in these amendments. Shall we discuss the other issues which the noble Lord is raising when we come to the amendments which deal with them?

Lord Elton: They seem germane to the conversation that we have already had, but I am quite happy to resume at a later stage when I have had time to sharpen my arguments.

Lord Sharman: I have listened with great interest to noble Lords batting the argument back and forth, if I may say so. The purpose of the amendment was, as I said, to get a clearer view as to what comprises practitioners. I am conscious that the Bill, as presently drafted, deals with the practitioner panel using the words,
	"to represent the interests of practitioners".
	I am conscious of the words that the Minister used in saying that he did not want to be too prescriptive. Nevertheless, the Bill is prescriptive to a degree, because it sets out a number of categories which must be represented. The purpose of my amendment--in particular, the addition of "authorised persons"--was deliberate. It is important to understand that, where a representation issue arises in the corporate sphere, those who represent a corporation represent the corporation's views and, I suggest, probably disagree with them publicly in panels at their peril. There is a vast body of opinion and expertise called "authorised persons". The purpose of adding such a category was to enable the panel to have a different perspective from that of the corporate perspective. I ask the Minister to consider that point further. In the meantime, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Lord Saatchi: moved Amendment No. 71:
	Page 4, line 5, after ("on") insert--
	("(a) whether any proposed rules, codes, general guidance or statements, or amendments to them, are appropriate in light of the Authority's general duties; and
	(b)").

Lord Saatchi: In moving the amendment I shall address also the principles behind other amendments grouped with it. I hope that that will give my noble friend Lord Elton an opportunity to pursue his inquiries. My noble friend Lord Kingsland will specifically address Amendments Nos. 74A and 75A.
	We have just heard the Minister say several times that we must not be too prescriptive and that it is unnecessary to be prescriptive. Our Benches take the opposite view. I shall try to explain why. Under Clause 7, the FSA,
	"must make and maintain effective arrangements for consulting practitioners and consumers on the extent to which its general policies and practices are consistent with its general duties under section 2".
	Therefore, the consultation takes place only in relation to general policies and practices. The purpose of Amendment No. 71 is to require the FSA to consult also on,
	"whether any proposed rules, codes, general guidance or statements, or amendments to them, are appropriate in the light of the Authority's general duties".
	Clause 8 gives the authority a specific duty to set up the practitioner panel which is designed to represent the interests of this community. It sits alongside the consumer panel. The authority is obliged to have regard to any representations made to it by the panel, but that is the extent of its statutory consultation duties. There is no obligation on the FSA actively to consult the panel.
	In our view, the authority should be obliged to consult the panels in advance of any general public consultation. Amendments Nos. 74A and 75A tabled by my noble friend Lord Kingsland will deal with that point directly. The APCIMS, LIBA and the Burns Committee have all recommended that, at the very least, if the authority does not act on recommendations made by the panel it should be obliged to publish its reasons for not doing so.
	This matter is important because David Challen, the chairman of the panel, currently called the Practitioner Forum, expressed his fears to the Joint Committee that in the absence of strong statutory obligations to involve practitioners, they could easily end up being marginalised. He argued that the Bill should include an obligation on the FSA to give reasons if submissions by the panel were ignored.
	The first annual report of the Practitioner Forum reiterated its concern:
	"In the absence of this requirement [to publish reasons for ignoring Forum/Panel submissions], we feel it would be possible for a future administration to sideline the Panel and make it difficult for the Panel to assert its viewpoint".
	However, the Government have so far strenuously refused to strengthen the consultation obligation.
	Amendment No. 77 applies to Clauses 8 and 9 respectively. At present, there is no requirement on the FSA to consult either the practitioner panel or the consumer panel before issuing draft rules, codes, general guidance, statements and other matters for more general public consultation. The amendment would make it a requirement that, before publishing draft rules, codes, and so forth, for public consultation, the FSA must have given the two panels a reasonable opportunity to make representations on the draft rules and codes, and so forth. We believe that that will have the benefit of establishing clearly the way in which the panels would fit into the consultation procedure and would result in draft rules, codes, and so forth, which are published for public consultation already incorporating suggestions and improvements made by the two panels. I beg to move.

Lord Faulkner of Worcester: I am puzzled as to why the noble Lord, Lord Saatchi, believes that this amendment is necessary. Extensive consultation requirements are listed in Clause 146, so that every time the FSA wants to make rules it has to take into account matters such as cost benefit analysis and the reasons for believing that the rules are compatible with the FSA's general duties as set out in Clause 2. Similar provisions would apply to codes of practice and so on.
	It seems to me that the industry, consumers and everybody else will have ample opportunity under Clause 146 to comment on those draft rules. I would have thought that the practitioner panel and indeed the consumer panel, to which we shall turn in a moment, would be able to feed in views along with everybody else. I am puzzled as to why it is felt necessary that those two panels should be given a special position in terms of consultation when the provisions that the FSA makes under Clause 146 are so extensive.
	I do not believe that the authority is backward in seeking consultation on its various procedures and plans. Since its introduction it has published no fewer than 45 consultation papers and has actively sought the views of the public, consumers and practitioners on what it is doing. Therefore, I feel that these amendments are not necessary and that we should be able to rely on the provisions contained in Clause 146.

Lord Jenkin of Roding: My noble friend referred to the evidence of Mr David Challen, the chairman of the FSA Practitioner Forum. It is worth while reminding ourselves what Mr Challen told the Joint Committee. I quote from page 104 of the evidence in the second column:
	"we ask ourselves what power do we have to enforce accountability in terms of the question we are addressing? The answer of course is none except the threat of public dissent. As things currently stand, however, I think we will exercise real influence. The trouble of course is that arrangements have to be inspected for their durability not just in relation to the present incumbents in the job".
	We have to look at that. At the moment it is working well and there is delight, in which I join, that it will be statutory. We have to have regard to what may happen. In other walks of life one has seen that people who have substantial regulatory powers come to think of themselves as, not immune to criticism, but certainly as not having to pay too much attention to it. In relation to this panel--the same can be said of the consumer's panel where there is probably common interest--a way has to be found whereby the authority can be made to listen. As I understand it, this group of amendments is intended to make that more explicit. I believe that if we accepted these amendments we would reflect Mr Challen's concerns. I hope that the amendment will be pressed.

Lord Boardman: I support the amendment. It is important that the authority runs smoothly. Instead of imposing changes to the rules or guidelines which could lead to complaints, before the rules or the guidelines are altered there should be consultation with the practitioner panel and the consumer panel. I believe, in the interests of the smooth running of the whole operation, that it is right to accept this amendment.

Lord Elton: In the exchanges in relation to the previous amendment I was told to withhold any further interventions until we came to the more relevant amendment, which I take to be this one. I see from the noble Lord that it is.
	We return to the matter of the actual weight and manner of the operation of the panel. The practitioners will be a major issue. When we suggested that the consultation as proposed might not be sufficiently wide, we were told that it was not the only route for consultation because of the requirement on the authority in Clause 7. When we said that they may be tempted to act as representatives as they were so described in the statute, we were told that that would be against the interests of existing trade associations. It becomes increasingly difficult. I remember the noble Lord saying that the BBA itself would object. If that is not resistance from what I venture to call a trade association, it is difficult to know what is.
	We remain uncertain as to what the relationship is to be between the panel and the authority, except that the panel will be appointed by the authority with the single limitation that the chairman thereof shall be appointed only with the agreement of the Treasury. My noble friend rightly asked what weight will be given to its recommendations. To my mind, Amendment No. 75A, in the name of my noble friend Lord Kingsland, is the nub of the matter. The authority will be required to explain the reasons if it should reject the advice of the panel. In the light of what the noble Lord, Lord Peston--now sadly absent--suggested may be the manner in which the panel conducts itself and the fact that, from time to time, it may be called upon to give detailed advice on small issues, I would have thought that the amendment of my noble friend should read:
	"The Authority shall give reasons in circumstances where it intends to proceed against the Consumer Panel's formal advice",
	and that there should be provision for informal advice which should not be the subject of a full disagreement or discussion between the panel and the authority and that the normal traffic of every day would be without that sort of procedure. However, if there were a major issue on which the panel felt that there were strong views and that the authority had not taken sufficient account of them, it should give formal advice and the authority should then be required to give a formal reason for rejecting that advice.

Lord Newby: I wish to speak in support of our Amendment No. 279, the last amendment to be included on this Marshalled List, and to other amendments in this group. Our amendment deals with one particular form of rule-making on which we believe that the practitioner panel and consumer panel should be consulted and whose comments should be taken formally into account before the authority can move on to the next stage of the promulgation of those rules. We are concentrating specifically on orders here, and we argue that any orders made under the Act must be referred to the practitioner panel and consumer panel for their comments.
	However, the same principle applies equally to the less formal layers of guidance to be issued by the FSA; namely, the rules, codes, general guidance, statements, schemes and other matters referred to in the amendment tabled in the names of the noble Lords, Lord Kingsland and Lord Saatchi. I agree with the principle that these two panels, having been established, should in every case where the FSA is about to issue guidance in any form--whether statutory or non-statutory--should be consulted and asked formally to submit their comments. Furthermore, in cases where the FSA proposes not to agree with their comments, the FSA should give its reasons, as proposed in Amendment No. 75A.
	One area where I have a little difficulty with the amendments in the names of the noble Lords, Lord Kingsland and Lord Saatchi, is the two-stage process that they have in mind. They propose that, at the point at which the FSA has a draft with which it is satisfied, it should go to the panels. The panels will give their comments which the FSA will consider. The FSA would then publish the draft for more general comments. It seems to me that that intermediate stage could produce delays which would be particularly unfortunate during the early life of the FSA when it will be producing so much guidance and will have a great deal of work to do. Our general view on that point is that the panels should see the draft guidance at the same time as everyone else, but unlike everyone else, they should be specifically expected to comment on it and the FSA should be formally expected to respond to those comments.
	The principle that lies behind all the amendments in this group is that, having set up the panels, it is of crucial importance that they have a clear view of what is expected of them and, equally, that the FSA has a clear view of its responsibilities in respect of them; namely, that any formal comments required by the authority on rules, guidance and so forth made by the panels should subsequently be promulgated.

Lord Burns: I intervene briefly to speak in support of Amendment No. 74A, which proposes that the authority should give reasons where it disagrees with the practitioner panel or the consumer panel. That follows a recommendation made by the Joint Committee.
	When we were taking evidence, I was impressed by how often we heard witnesses state that one of the most frustrating aspects of any form of consultation on a proposal is when the Government do not give a clear answer and an explanation of why they disagree with that proposal. Often, consultation can appear to be a one-way street. Many arguments are put forward, but in the end those arguments are met with silence. Many witnesses found the functions of the Joint Committee helpful because they provided circumstances in which the Government were forced to give reasons why they disagreed with certain advice and proposals.
	We thought it was important to provide a mechanism whereby pressure is put on the Government to give reasons. Indeed, part of my frustration at the Government's responses to some of our recommendations was the absence of clear reasons. In the longer term, I support the proposal to introduce mechanisms to ensure that the FSA--not all the blame can be laid on the Government here--must respond with reasons where there are disagreements.

Lord Kingsland: I am particularly pleased to speak in support of my two amendments in the light of what the noble Lord, Lord Burns, has said about them.
	I should like to reflect on one or two points in Amendments Nos. 74A and 75A. First, these amendments are even-handed; they refer not only to the practitioner panel, but also to the consumer panel. They have a balanced approach to consultation.
	Secondly, the Minister will recall that, in the early stages of the first day of our debate in Committee, it became clear that the powers the FSA is to exercise through these codes and rules are legislative powers. The authority's ability to use legislative powers is confined to financial regulators in this country; they are the only authorities outside Parliament which can act in a legislative manner. In the case of these codes, Parliament will not be consulted on them. For that reason, the responsibilities on the FSA in this area are boundless.
	I acknowledge what has been said by the noble Lord, Lord Faulkner, on Clause 146. It is true that the clause states that the FSA will be required to give notice of what it is going to do and to have regard to representations. However, as a number of noble Lords have already indicated, receiving representations is not the same as having the right to comment on them and the right to have those comments made public where they disagree with a draft code.
	Two years ago when the Access to Justice Bill, now an Act, was going through your Lordships' House, a similar issue arose in relation to the code-making powers of the new legal services authority and the requirement for it to consult. That is reflected in the relationship it now has with the respective consumer consultee. At the time, the noble and learned Lord the Lord Chancellor was perfectly content to provide for the publication of any disagreements between the legal services authority and the consumer panel. Indeed, I recall that he said something along the lines of, "We are the Government who believe in transparency". If a disagreement arises during consultation with a body set up under statute then it is only right, in the interests of transparency, that that disagreement should be made public.
	It is in that spirit that these amendments have been drafted. I look forward with great interest to hearing the comments of the Minister.

Lord McIntosh of Haringey: I am glad to have an opportunity to respond to the amendments in this grouping and to clarify the Government's view of how the arrangements for consultation will work, in particular as regards the panels to be established under Clauses 8 and 9.
	Perhaps I may first explain the background to the whole of the consultation process. As my noble friend Lord Faulkner pointed out, the Bill contains a number of specific obligations to consult. The obligation under Clause 7 is a general duty that ties to the general duties of the authority under Clause 2(4). Other obligations to consult are set out in the context of specific legislative provisions, for example, on rules under the arrangements set out in Clause 146 or on statements of principle and codes of practice for approved persons issued under Clause 63.
	Perhaps I may remind Members of the Committee of what is stated in Clause 146. If rules are to be made, a draft must be produced and, under subsection (2),
	"notice that representations about the proposals may be made to the Authority within a specified time".
	Under subsection (4) it states,
	"Before making the proposed rules, the Authority must have regard to any representations made to it in accordance with subsection (2)(d)".
	Furthermore, in subsection (5) it states,
	"If the Authority makes the proposed rules, it must publish an account, in general terms, of--
	(a) the representations made to it in accordance with subsection (2)(d); and
	(b) its response to them".
	I shall return shortly to certain points on the wording, such as "in general terms", but I believe that it cannot be said that there is no provision for consultation, for the publication of the content of that consultation or of the responses to that consultation. We regard these obligations as significant. They are part of the accountability packet that will ensure that the authority exercises its powers appropriately. It is for that reason that we brought forward these amendments to reinforce and standardise the specific consultation arrangements under the various legislative proposals.
	Let me say specifically that the feedback requirements of Clause 146(5) which I have just read out were brought into the Bill after Mr Challen, the chairman of the Practitioner Forum, made his observations to the Joint Committee which have been quoted in debate this afternoon.
	The obligation under Clause 7 plugs a number of gaps. It requires the authority to maintain effective arrangements for consulting consumers and practitioners on the extent to which its policies and practices are consistent with its general duties. There is no need to make it cover other matters such as rule-making; they are already covered in the provisions I have been quoting. So the amendment proposed by the noble Lord, Lord Saatchi, introduces unnecessary and undesirable duplication into Clause 7.
	Clauses 8 and 9 supplement the general proposition about maintaining appropriate arrangements for consultation with practitioners and consumers by imposing an obligation on the authority as part of its arrangements under Clause 7 to establish and maintain a panel of practitioners and consumers. The panel has already been established. It is operating and making its voice felt, as we heard.
	It is important to get clear that the panel is there to advise the authority, whether pro-actively or responsibly, on matters of concern to the members of the panels and the constituencies they represent. It is in a unique position because of its proximity to the authority. It will have easier access to directors and senior staff and external bodies. But we must not lose sight of its purpose or status. We are not creating competition to the existing trade associations. The role of the panels will be quite distinct. Of course, we are not saying that they should be subservient to the interests of the authorities. They are there to be independent and challenging, and that is what is happening.
	I turn to the specific amendments. The Government are not unsympathetic about the points made in relation to Amendments Nos. 71, 74 and 77. We expect the panel to be consulted on proposals for rules. The relevant provisions I have been reading out require consultation and bring the panels squarely within the scope of the consultation arrangements. The point that is more difficult is the requirement on the authority to consult the panels before issuing proposals for wider public consultation. The Bill does not say, "We cannot do that", and should not say that.
	Where rules are being made in response to specific anxieties made known in reports by one or other of the panels, one may well feel that the authority would speak to the relevant panels as a matter of course to ensure that their views have been fully understood. All of that can be read into Clause 146. However, to make it a statutory obligation would be quite excessive. The current practice is to allow the public three months to respond. I understand it is not uncommon for the authority, before issuing proposals, to take the panel's views on the broad policy issues. But to delay rule-making in order to give the panels an opportunity to comment prior to consultation would make the whole process slow and bureaucratic.
	Clearly the panels may not need very long to give their responses. That point was made from the Liberal Democrat Benches. However, I am not sure we could always assume that that would be the case. But even if they did respond quickly, the authority would need to prepare papers for the panels to consider their responses. Perhaps there is comfort to be drawn from the fact that the panels would be aware of the consultation timetable in advance and may be able to give a public response to the authority in advance of the end of the consultation period for the benefit of others who are being consulted. They could also, in a purely pro-active way, be well-placed to consider issues that they know to be current and make recommendations during the policy-formulation process that will inform the rule drafting.
	I turn to Amendments Nos. 74A and 75A. The Bill already requires the authority to make a statement in general terms in relation to representations made to it during consultation. The relevant provisions which I have read out apply to representations whether they are made by the panels, representative bodies, individual practitioners or consumers. The same is true of Clause 63 when we come to codes.
	The reason for qualifying the coverage of the feedback statement in general terms is to ensure that the authority is not unduly burdened in having to respond to umpteen specific but related points, rather than explaining the crux of the points that have been made and giving a general answer. It may also be the case that in some situations the authority will need to generalise its report in order to protect the identity of a firm or consumer who had raised a valid point in confidence. Any suggestion that the authority can ignore representations from the panels is nonsense. It is expressly required to have regard to representations made to it by provisions such as Clause 146(4) and those provisions feature in the consultation provisions for all the authority's legislative powers under the Bill.
	The panels have an advantage in that they will have facilities to publish their responses. I cannot see how the authority can fail to address serious issues which are raised with it in public when it issues its feedback statement. I entirely appreciate what was said by the noble Lord, Lord Burns, in relation to the frustration which he described when government stay shtumm and do not respond to representations made to them. I suspect that he may have seen some of that from the other side from his time in the Treasury. I hope he will accept that the wording of the Bill as it now stands in practice makes that impossible.

Lord Burns: I am grateful to the Minister for giving way. Does he agree that subsection (5)(b) simply allows the authority to say, "We disagree"? As the Minister says, I have spent a good deal of my life answering some of these questions. The skill, as we know, of some of my former colleagues in giving an answer without giving an answer is one of the things we are brought up to do. That is my worry.

Lord McIntosh of Haringey: We are too close to this. I experience difficulty in getting the Treasury to answer questions which I am asked in parliamentary terms and wish to answer straight. There is reluctance sometimes to do that. But it would be difficult for the authority to do it. It would get itself into public trouble, particularly after this debate, if it ignored the representations made to it, particularly by panels.
	Finally, I turn to Amendment No. 279. Clause 404 specifies the procedures applying to powers under the Bill that are exercisable by statutory instrument. The effect of the amendment would be to require the Treasury to consult the panels before making regulations and orders under the Bill. It would impose the same requirements on the Lord Chancellor when making tribunal rules for the purposes of Part IX.
	There are two aspects to this. The first is whether the Treasury and other departments should be under an obligation to consult before making secondary legislation. I suppose one could argue that they should. But if we are going to do that, it should apply to all secondary legislation and it might lead to a considerable slowing down in government. The delegated powers to make secondary legislation by statutory instrument and the procedures applying in each case were examined in the Treasury's memorandum to the Delegated Powers and Deregulation Committee. The committee substantially endorsed the approach in the Bill and the Treasury subsequently responded positively to the committee's seventh report of 16th February 2000.
	The Treasury does not believe it is appropriate or desirable for there to be a statutory duty to consult. The order and regulating powers are subject to the approval of Parliament and Ministers are answerable to Parliament for their actions. The considerations are quite different as compared with the arrangements for the exercise of delegated legislative powers by the authority. Of course, as a matter of policy and practice the Treasury, like other departments, seeks wherever possible and appropriate to consult those likely to be affected by secondary legislation. It will continue that practice under this Bill and some noble Lords will be aware that the Treasury consulted publicly on a number of draft orders that it proposes to make under the powers of this Bill.
	The second part concerns the role of panels in consultation. I assure noble Lords that the Treasury, when consulting on draft statutory instruments, would be interested to hear any comments from the panels, just as it would from any other person. The practitioner and consumer panels are to be established and maintained by the authority under arrangements for consulting consumers and practitioners. They are created for a specific purpose, and that purpose does not include becoming a trade association or lobby group; they are there to advise and inform the authority. It would not be appropriate for them to have a special role in scrutinising the exercise by government of its legislative functions.
	We have returned to the issue that was raised in relation to the previous group of amendments when we discussed what was prescriptive and what was too prescriptive. The Bill already permits the things that the amendments seek to achieve, but there is no need for them to be set in stone. The more we seek to set out what the panels must or may do, the more we serve to cast doubt on the ability of the panels to set their own agendas. I hope that the noble Lords will not persist with the amendments.

Lord Elton: I hope that the noble Lord will not think me obtuse, but he has frequently illustrated in relation to Clause 146 how the authority is bound to consult and be open, and he has also referred to Clause 63. The requirements contained in Clause 146 are mostly internal to it, but the requirements to consult and to be open in Clause 63 appear to be entirely external to it. I would be most grateful if the Minister could remind me how the behaviour of the authority, about which he has given an assurance, is a requirement in statute under Clause 63.

Lord McIntosh of Haringey: I did not say that they were exactly the same, but the analogy is quite close. Clause 146 is about rules and Clause 63 is about statements and codes of conduct. Although the wording is not identical, the purpose is the same.

Lord Elton: Clause 146 contains many requirements in relation to the authority's behaviour, but they are not contained in Clause 63. I take it, therefore, that the Minister is looking to Clause 7 for the requirement in relation to consultation and openness.

Lord McIntosh of Haringey: The noble Lord will have to read Clauses 63 and 64 together. Clause 63 sets out the details of the code and Clause 64 sets out the procedure, including the draft, the representations and the response, in exactly the same words as Clause 146.

Lord Elton: I am grateful to the noble Lord. I said that I was probably being obtuse, and indeed I was. My only purpose in again rising to my feet, apart from that embarrassing admission, is to say that Amendments Nos. 74A and 75A in the name of my noble friend Lord Kingsland have survived the defences of the noble Lord, and I hope that my noble friend will persist in them at some stage.

Lord Saatchi: In trying to sum up this group of amendments, I should like to say that it is always a pleasure to see the Minister both inside the House and outside it but, having sat through nearly a day and three-quarters in Committee, I am beginning to wonder why he feels it necessary to come along. On the basis of his responses so far, he might just as well have popped along to Dixons and got a tape recorder and tape recorded the words "I am sympathetic to the amendments, but no".
	This case in point is perhaps the most striking example of that approach. Each noble Lord who has spoken, with the exception of the noble Lord, Lord Faulkner, has supported the principle behind the amendments. In addition, two very powerful voices have spoken for the amendments: the noble Lord, Lord Burns, said that at the very least the FSA should publish its reasons and that there should not be a silence. He pointed out that if the Government do not feel an overwhelming need to give reasons to a joint committee for both Houses of Parliament in rejecting its recommendations, what possible hope does the practitioner panel have?
	We do not need to speculate about the meaning of the words in the Bill because we have Mr Challen saying that it would be possible for a future administration to sideline the panel. That is the concern. I am not aware that Mr Challen has withdrawn that view. Therefore, I think that the Minister and the Government could give a more practical demonstration of their sympathy for the amendments rather than just warm words.

Amendment, by leave, withdrawn.
	Clause 7 agreed to.
	Clause 8 [The Practitioner Panel]:
	[Amendments Nos.72-74B not moved.]

Lord Elton: moved Amendment No. 74C.
	Page 4, line 21, at end insert--
	("( ) The Authority shall provide such resources as it considers necessary for the effective operation of the Practitioner Panel.").

Lord Elton: I beg to move Amendment No. 74C. I hope that more light will now be thrown on how the panel will operate. I do not put this forward as the proper means of securing proper funding but as the proper means of learning the Government's intentions for the operation of this panel. I presume that what goes for the practitioner panel goes for the consumer panel as well, although I have not linked them together.
	The panel, if it is to be effective, will require a secretariat and make its own, perhaps quite wide, inquiries among practitioners, whether by fax, e-mail, post or telephone. These duties will have to be conducted by somebody who will have to be paid, unlike the panel members, and the communications bills will have to be paid. Can the Minister state the funds from which those expenses will be met? If they are to be met from the funds of the panel, how will the requirement be met in assessing the total requirement of the panel?
	Amendment No. 74D, which is grouped with Amendment No. 74C, has been tabled to try to draw the Minister further. However, I think he will say that all these matters are entirely in the hands of the authority and nothing to do with him. Whether we think that that would be a satisfactory reply is another matter, but I assume that that is the present intention of the Government.
	Will the panel act only as a group? Will it be able to form sub-committees to deal with specialist questions, and will it be able to co-opt practitioners with expertise that is not represented on the panel? I understand that the Minister is anxious that the panel should remain fairly small, a situation that will inevitably cause gaps. I should like to know how that difficulty will be met and whether co-option will be permitted.
	These are probing amendments and I hope that the Minister will not strain himself to point out their drafting defects but use the opportunity, which I hope is welcome to him, to give us further insight into what he has in mind.

Lord Hunt of Wirral: I welcome the opportunity to speak to Amendment No. 74E, which is grouped with the two amendments tabled by my noble friend Lord Elton.
	Under the amendment there would be established a panel known as a small business practitioner panel, which would have to be established in the general duty to consult arrangements set out in Clause 7. I have previously drawn the attention of noble Lords to the need for the small investment business to be regulated with particular sympathy and a different approach than that accorded to a much larger entity. The amendment would put on the face of the statute a requirement for the regulator to have available a source of advice which could inform him of the likely impact of its proposals on smaller firms.
	I contend that it is precisely those smaller firms for whom regulatory changes can have the greatest impact. A large institution can often absorb the cost of change with greater ease. The bureaucracy of regulation can often be adapted to its own internal bureaucracies. But a small business may find it much more difficult to accommodate a regulatory requirement and, at the same time, run a healthy and profitable enterprise. There may be ways in which the regulation can be adapted to meet the needs of the smaller business without compromising the objectives of regulation but, surely, the regulator needs to be aware of the implications of his proposals before he can contemplate remedial action.
	My amendment would give the regulator a source of information and would require it to be used. I am, of course, aware that such a panel already exists. Its co-chairmen are actually on the practitioner panel. But I believe that the standing and significance of the small business panel would be greatly enhanced by appearing on the face of the statute. A clear signal would then be given to the regulator, and to the regulated community, that the needs of small business were going to be taken properly into account. I have already mentioned that the panel exists. It meets monthly; it has had seven meetings, the first of which was in May 1999; it has 13 members; and it is very ably chaired by Roger Saunders and Michael Quick. They have led the panel with great expertise and experience. As I said, both sit on the existing practitioner panel.
	I seek to entrench what is already existing practice and, as I understand it, welcomed by the present chairman of the FSA. The panel works very well with the staff of the authority. It has on it representatives of the IFAs. Perhaps I may add here how much I appreciate the references made to independent financial advisers. As Members of the Committee know, I speak as chairman of the Association of Independent Financial Advisers. Under recent work carried out by IFA Promotion, those with fewer than 10 employees represent 86 per cent of all the firms. I have set the limit here as being,
	"businesses which employ fewer than fifteen persons".
	I hope that the Minister will concede that not only does this work very well in practice but also that it should not be something that is subject to the whim of the FSA. It should be placed clearly on the face of the statute.
	As I said, a practitioner who runs a small financial services business does not have the time or the resources to devote himself--as the noble Lord, Lord Faulkner, reminded us--to 45 consultation documents. Although he welcomes them and has a very good dialogue with the regulator, he cannot spend the time that others may be able to devote to so doing. The effect of regulatory action can have a disproportionate effect on the success and survival of that business. Therefore, it seems only reasonable to have a mechanism in place for assessing the impact upon the smaller business and for recognising it on the face of the Bill.

Lord Jenkin of Roding: Members of the Committee are very much indebted to my noble friend Lord Elton for having drawn attention to the need to have such panels properly resourced. That will have a major impact on the panel's effectiveness and its ability to communicate the concerns of practitioners. It will also help it to maintain a public profile.
	My attention was recently drawn to a survey of practitioners, which found that only one-quarter of small organisations and one-third of chief executives had even heard of this non-statutory practitioners' forum. It must have the resources to tell the industry what it is doing, what representations it is making and what impact it thinks it is having. The worth of its annual report, which it intends to publish, will equally be subject to its having enough resources properly to do so.
	At present, as no doubt the Minister will tell us, the forum has no budget. It has no staff and all its activities are being paid for on an ad hoc basis by agreement with the authority. This leaves the forum--and, indeed, if it continues, this will also apply to the panel--entirely dependent on the largesse of a body towards which it is meant to adopt a pretty arm's length relationship and of which it may from time to time be extremely critical. Its annual report admits that it is not equipped to comment fully on all the issues under consideration by the authority.
	We now have an opportunity with this Bill to put some of these things right. I do not know whether the amendments of my noble friend achieve that aim. However, reinforcing the points made on the previous amendment, if this body is to succeed--this applies equally to the consumer panel as it does to the practitioner panel--it must have the resources to enable it to be effective. If such a panel is simply dependent on what it can get from the authority, I fear for its influence. I hope that the Minister will feel able to comment on the issue.

Lord Blackwell: I should like to lend my support to the amendment proposed by my noble friend Lord Hunt of Wirral. I have some scepticism about the desirability of a panoply of panels with resourcing and functions prescribed in this way. I fear that such panels will just end up creating more delay and bureaucracy without having any consequent impact. I would favour a much looser requirement for the FSA simply to consult all those who have interests. That would save a great deal of wording in the legislation.
	However, if we are to have them, the danger is that panels constituted as simply representing practitioners and consumers would tend towards answers that are in the interests of large practitioners and consumers as a mass market; and, indeed, possibly bring forward solutions that are adverse in cost and competitive terms to the smaller practitioners where, as my noble friend said, the regulatory burdens are often heavier. Therefore, I strongly support the notion that one of those panels should be charged with looking after the interests of small practitioners so as to give them a particular voice.

Lord McIntosh of Haringey: The amendments before the Committee relate to the arrangements for the funding of the practitioner panel and the structure of the arrangements for representing the interests of practitioners. Perhaps I may start with Amendment No. 74C, which deals with funding. This is really unnecessary. There is a clear obligation on the authority to consult under Clause 7. When taken with the requirements under Clause 8, it is clear that that obligation will include the provision of funding where that is appropriate or necessary. If the authority failed to ensure that adequate funding was available, it would be failing to meet its obligations under these provisions.
	The same applies to the arrangements for the practitioner panel as for the consumer panel under Clause 9, although I noticed that the noble Lord did not seek to provide amendments to deal with the consumer panel. The difference--and this may be the reason why the noble Lord has not done so--is that the consumer panel originally had an allowance for three full-time equivalent staff and now has an allowance for four full-time equivalent staff. But, as has been said, the practitioner panel does not have its own budget. The members are pro bono and any commissioned research is paid for by the FSA. It has in fact commissioned research of the order of £100,000, which is not insignificant funding for the panel.
	However, if the issue is whether there should be a statutory requirement to have funding for the panel, I am afraid that Amendment No. 74C would not provide it. It states,
	"The Authority shall provide such resources as it considers necessary".
	That is a matter for the authority, not the panel.

Lord Elton: I made it clear that this is a probing amendment to find out how the funding is to be achieved and that at the next stage, if it is appropriate, we can produce something which will actually work.

Lord McIntosh of Haringey: I am happy to return to the real situation; namely, that where funding has been requested, it has been made available and there has been no difficulty with that. The Joint Committee recommended that the panels should report annually on the adequacy of their budget. We have no difficulty with that. There is no need for the Bill to spell it out, but the authority has undertaken to include in its annual report a report from the chairman of each of the panels which contain--

Lord Faulkner of Worcester: Has my noble friend seen the report from the consumer panel which reached a number of noble Lords today, which points out that its budget for the 13 months to 31st December was £538,000? It states modestly that it spent only £334,000. There is no hint at all that the panel is under-resourced. It states,
	"We have provided much 'behind-the-scenes' policy advice to the FSA's Board and staff before the FSA embarks on full public consultation and before it reaches final decisions. In addition, in 1999 we made 19 formal responses to consultations by the FSA, Government, Parliament and trade bodies. We publish all our responses and research".
	Surely this is not an under-resourced body or one that is whining for more money.

Lord McIntosh of Haringey: I knew that but I was hoping not to tell the noble Lord, Lord Blackwell, as he does not want all these panels and all this formality and prescription. However, the damage is done now.
	The other two amendments in the group address the question of the representation to the authority of the views of particular groups. Amendment No. 74D addresses the way in which the practitioner panel might be advised on the way in which the authority carries out its functions. It envisages a tiered approach of consultants and advisers who are able to reflect the interests of particular groups within the practitioner community.
	In the light of what I have said about the fact that the authority has funded research for the panel to the extent of £100,000, I hope that it will be recognised that there is no difficulty as regards spending money where that is necessary, but that the kind of formal approach proposed in Amendment No. 74D goes too far. There is no reason why the practitioner panel should not consult industry representatives. Indeed, where members of the panel do not think that they have enough expertise, it would be sensible for them to speak to those with a more direct interest. The authority itself might consult relevant bodies directly. It might, for example, talk with the Association of British Insurers about matters directly related to the insurance industry. Nothing in the Bill prevents the panel from doing any of these things. However, like the noble Lord, Lord Blackwell, we consider that we must avoid excessive bureaucracy.
	Amendment No. 74E would put the small business practitioner panel on a statutory footing alongside the practitioner and consumer panels. The noble Lord, Lord Hunt of Wirral, was right to remind the Committee that the panel already exists and appears to be quite active. I would rather not say so in the presence of the noble Lord, Lord Blackwell, but there is a huge list of panels which the authority has set up. I refer to the Financial Advisory Group, the IMRO Training Standards Panel, the Regulation of Market Abuse Practitioner Group, the Handbook Advisory Group, the FSA Lloyd's Steering Panel and the Lloyd's Panel. I shall stop there, although the list is longer.

Lord Elton: Surely the noble Lord has just demolished the whole case for having a big central panel, which I asked for earlier.

Lord McIntosh of Haringey: I have demolished the whole case for having statutory provision for these panels and a degree of bureaucracy in the way they operate which these amendments would introduce. I do not think that there is anything wrong with consulting. It could be done in the way the noble Lord, Lord Blackwell, suggests; that is, that the authority will have a duty to consult tout court. However, this is the way in which the current position has been interpreted, and surely that is right.
	I return to the small business practitioner panel. Quite apart from the fact that there are other panels, I do not want to underestimate the important role of small businesses, which is as clear in the financial sector as it is in any other. As someone who has been involved with a small business all my life, I am well aware of that. However, the amendment would simply beg the question of what other kinds of people should have their own voice. I said earlier that I did not think that it was necessary for the practitioner panel to have representatives of every conceivable category of person who might be regulated by the authority. We should not place an obligation on the authority to create different statutory panels for every conceivable group of practitioners.
	The arrangements in Clauses 7 to 9 were supported by the Joint Committee chaired by the noble Lord, Lord Burns. In response to a specific recommendation of that committee, the position of the panels has been enhanced by the addition of the requirement that appointment and dismissal of the chairmen should be subject to Treasury approval. We believe that we have the balance right. We believe that these amendments would be too prescriptive. I say to the noble Lord, Lord Saatchi, that I am sympathetic to his arguments, but I do not accept them.

Lord Peyton of Yeovil: I was immensely excited when the noble Lord, Lord Burns, said how important it was that those who take part in a consultation exercise should occasionally receive an echo from the authority that they seek to address. I, for one, greatly admire the skill of the noble Lord, Lord McIntosh. However, his remarks gave the impression that he had never heard of Jones. Jones is an important person in our country; everyone wants to keep up with him. If one finds that one is excluded from a list of people to be consulted, or one is excluded from a list of panels, one will probably feel rather affronted and upset. One finds it hard to explain to one's constituents how one allowed the Government to get away with that and not to accord one the recognition that they have given to everyone else.
	I am not against the Bill; it is a splendid attempt to deal with a problem. However, it constitutes a fairly large affair now. I do not think that I am breaking all bounds of forecasting when I say that it is quite likely to be a fairly potent and fertile breeder. By the time it is finished, the rules, procedures, customs and so on that it establishes will constitute a large forest for people to find their way around. Some lawyers will enjoy that very much, but the ordinary citizen will not. I see the difficulty that the Government are in, but I should like to be given some indication of how they intend to get out of it. Having produced a huge amount of material, the Government suddenly say, "Goodness, this is getting awfully complicated. We are getting into a bureaucratic tangle and we must stop it". No one else is allowed to turn on the tap. No one else is allowed any of the largesse which has been handed out so freely to others. I believe that many people will have considerable grounds for complaint. I know that the noble Lord wishes to be fair to everyone. I am trying to express my profound sympathy with his efforts and my earnest hopes that he will be successful.

Lord Blackwell: I am grateful to the Minister for reading the list of practitioner groups that have been set up, and for stopping when he did! However, I was reminded of how consultation was conducted in the past. I am thinking particularly of NEDO, as was, and the wonderful principle--that no one could disagree with--that the Government should consult with industry and with the unions. Then we had little Neddys and, before long, we had hundreds of people spending hours in all kinds of sector groupings, until one day someone said, "Does anything practical or useful come out of any of this?" The answer was "No". Noble Lords on both sides of the House may need to reflect more on what is being set up and its value, and come back to the matter at a later stage.

Lord Hunt of Wirral: I am disappointed with the Minister's words. I hope he will not think me unreasonable, but, on behalf of the small business sector--particularly as the noble Lord has widespread experience of that sector--I take some offence at the amendment being dismissed on the grounds that if one extends a panel to small businesses one extends one to every conceivable group of practitioners. Surely the Minister accepts that small businesses have always received special status, not only in legislation but in directives and regulations from the European Community. In that capacity, what is working well must continue. Although I recognise why he is reluctant to accede, I think that when the moment comes I shall test the opinion of the Committee.

Lord Elton: I am not sure whether my noble friend intends to test the opinion of the Committee at this stage or the next stage, but I should like to say a word in his support. I have been engaged with very many small businesses--and with very many very small businesses--in the regulatory field of finance for a number of years and I have witnessed very closely the distress that some of them labour under with the enormous amount of regulatory work, paper and returns required of them under the relatively small agency of the Securities and Investment Board. The FSA is many times bigger and more powerful. It is proper that small businesses should be accorded special protection--or at least the notification of a special interest by Parliament in their affairs--because bureaucracies eat up small businesses quicker than anything.
	Turning to my amendment, I should like the noble Lord to tell the Committee two things. First, why should the passage, read out with such pleasure and enthusiasm by the noble Lord, Lord Faulkner, about the good conduct of the authority now, when it is a voluntary agency, make us feel that there is no need to ensure that that good conduct continues after it has become a statutory body--any more than the good conduct of a private mine owner should have been enshrined in the statute which nationalised the mines many years ago?

Lord Faulkner of Worcester: Because the authority will have a statutory duty to maintain the panels listed in the statute.

Lord Elton: Yes, it can maintain them, but will it maintain them to the standard to which they are accustomed--as I remember asking prospective sons-in-law sometimes? In legislation one must not assume the best but prepare for the worst.
	There should be a source of funding. My noble friend Lord Jenkin of Roding is right that that source should not ideally be in the hands of a body with which this panel might quite possibly be at odds. He gave examples of how the authority had funded research by the voluntary panel. Supposing the request was for research to verify a statement which the panel had made to the authority saying that the way it was behaving was grievously damaging to a part of one sector of the market, and the authority was not of that opinion. Would it as liberally provide the resources to make those inquiries? I doubt it.
	The noble Lord looks horrified. He keeps thinking of an individual known to him as the conductor of all the affairs of the authority. We know no such person. We know not who will be there in five years or ten; we do not know who will be on the authority; indeed, we do not know who will be appointed to the panel. We are trying to prepare grounds for the proper conduct of an industry vital to this country, and that must be properly financed.
	My second question is whether the noble Lord will remind the Committee whence this money comes? I know that he will tell us that we will be dealing with funding later in the Bill, but am I right in thinking that the money that has so far been liberally given is drawn from the practitioners themselves? How much will it amount to in the years to come? I give way to the noble Lord.

Lord McIntosh of Haringey: The answer to the first question is, as I said, that Clause 7 states that the authority must make and maintain effective arrangements for consultation. That is not a statutory requirement at the moment. The fact that the authority does so before there is a statutory requirement hardly leads us to think that when there is one it is likely to break the statute and refuse funding to either of the panels.

Lord Elton: I am sorry. Again I am asking a question to which the noble Lord obviously thinks I know the answer. Whose money is it that the authority will be giving?

Lord McIntosh of Haringey: The noble Lord asked two questions. I had answered one and before I had a chance to answer the second one the noble Lord stood up again. That is his privilege--we are in Committee--but I should like an opportunity to answer the second question. The answer is that the Financial Services Authority is a company, limited by guarantee, which is funded by fees from the regulated community.

Lord Elton: I am most grateful. The Minister made a small gesture. Like the noble Lord, Lord Peston, I read into his movement that he was sitting down when he was not. I am grateful for that answer.
	I shall read with great interest the answers that we have had so far. I reserve the right to come back to this issue at Report stage. In the meantime, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.
	[Amendment No. 74D not moved.]
	Clause 8 agreed to.

Lord Hunt of Wirral: moved Amendment No. 74E:
	After Clause 8, insert the following new clause--

THE SMALL BUSINESS PRACTITIONER PANEL

(" .--(1) Arrangements under section 7 must include the establishment and maintenance of a panel of persons (to be known as the "Small Business Practitioner Panel") to represent the interests of practitioners who are in businesses which employ fewer than fifteen persons.
	(2) The Authority must appoint one of the members of the Small Business Practitioner Panel to be its chairman.
	(3) The Treasury's approval is required for the appointment or dismissal of the chairman.
	(4) The Authority must have regard to any representations made to it by the Small Business Practitioner Panel.").
	On Question, Whether the said amendment (No. 74E) shall be agreed to?
	Their Lordships divided: Contents, 57; Not-Contents, 110.

Resolved in the negative, and amendment disagreed to accordingly.
	Clause 9 [The Consumer Panel]:

Lord McIntosh of Haringey: moved Amendment No. 75:
	Page 4, line 35, after ("or") insert ("are or may be").

Lord McIntosh of Haringey: I spoke to this amendment with Amendment No. 62. I beg to move.

On Question, amendment agreed to.
	[Amendment No. 75A not moved.]

Lord McIntosh of Haringey: moved Amendment No. 76:
	Page 4, line 37, leave out from second ("persons") to end of line 39 and insert ("--
	(a) who are consumers for the purposes of section 129; or
	(b) who, in relation to regulated activities carried on otherwise than by authorised persons, would be consumers for those purposes if the activities were carried on by authorised persons.").

Lord McIntosh of Haringey: I spoke to this amendment with Amendment No. 62. I beg to move.

On Question, amendment agreed to.
	[Amendment No. 77 not moved.]
	Clause 9, as amended, agreed to.

Lord Saatchi: moved Amendment No. 78:
	After Clause 9, insert the following new clause--
	:TITLE3:PUBLICATION OF INFORMATION BY THE AUTHORITY
	(" .--(1) The Authority shall, subject to subsection (2), publish or disclose information to any person on request with a view to enabling members of the public to make informed judgements about the way in which it is carrying out its functions.
	(2) Before deciding not to publish or disclose information, the Authority must decide that the public interest is outweighed by any considerations of confidentiality attaching to it.").

Lord Saatchi: On behalf of my noble friend Lady Wilcox, who is unavoidably absent, I shall address Amendment No. 78.
	The noble Baroness's amendment seeks to provide the Committee with an opportunity to debate the extent to which the Financial Services Authority will be open about its activities. We should like it to be required to operate under a presumption of openness. That means that everything should be open unless there is a good reason for it not to be. The Minister may like to confirm that the FSA will be among the bodies that will be covered by the provisions of the Freedom of Information Bill. That will be most welcome. There are well-documented concerns relating to provisions in that Bill which we shall no doubt consider in more detail when the Bill comes before this place.
	As a general principle, however, we favour the introduction of a more stringent openness requirement on regulatory public bodies. The Food Standards Agency--curiously, another "FSA"--is required to operate more openly than it would be under the freedom of information legislation. So the wording of the amendment deliberately echoes the wording to be found in the Food Standards Act. The public would be placed in a position to make informed judgments about the performance of the Financial Services Authority.
	Following the widespread mis-selling of pensions and endowments, the FSA has a vital role in restoring public confidence in the industry. Market confidence is indeed one of its prime objectives in Clause 2(2)(a). An open regulatory system is a fundamental aspect of the attempt to rebuild trust. Because the public need to be satisfied that their interests are being given due weight in decisions that impact on them, recommendations made by the consumer panel to the authority and the authority's response to them ought to be in the public domain. Transparency about information flowing between the FSA and government would also be very welcome.
	We think that the new clause is balanced. It recognises that there are sometimes important considerations of confidentiality which may justify a decision not to publish or disclose information. But the amendment would ensure that the FSA, before reaching such a decision, must first have to have concluded that those interests do outweigh the public right to know. The amendment introduces a general presumption of openness. I hope that the Minister will feel able to give a positive response to this most modest proposal. On behalf of the noble Baroness, Lady Wilcox, I beg to move.

Lord McIntosh of Haringey: I hardly dare say that I am sympathetic, but no. The purpose of the amendment is entirely admirable. It is to enable members of the public to have access to information on request which would help them to make informed judgments about the way in which the FSA is carrying out its functions. Access to information to enable greater understanding and transparency is of course right, but the new clause is in fact unnecessary because the authority will be a designated body, as the noble Lord anticipated, for the purpose of the Freedom of Information Bill, which was not published in its present form when the Food Standards Agency Bill was first introduced and therefore will be required to make disclosures in accordance with the requirements under that Bill when it is enacted. One of the stated purposes of the Freedom of Information Bill is to extend progressively the right of the public to have access to information held by public authorities.
	It is not only that the suggested clause is unnecessary, but it would allow access to information relating to a fairly narrow range of activities; that is, information relating to the way the FSA is,
	"carrying out its functions".
	The FSA's responsibility to allow access to information under the Freedom of Information Bill means that it has to provide access on request in connection with all of its public functions and not just the way it is carrying out its functions. Subsection (2) of the amendment provides a carve out for confidential or commercial information. Of course it is important that the authority is able to protect sensitive information. Indeed, it is under a legal obligation to do so. The Freedom of Information Bill makes appropriate provision to afford such protection, as indeed does Part XXII of this Bill.
	The Government are sympathetic to the intention of the amendment but believe that it is an unnecessary addition, given that it is already provided for by the Freedom of Information Bill.

Lord Saatchi: I fear that this is another example of what I described previously. The Government are prepared to express sympathy but are not prepared to act slightly more decisively. Therefore, I wish to test the opinion of the Committee.

On Question, Whether the said amendment (No. 78) shall be agreed to?
	Their Lordships divided: Contents, 47; Not-Contents, 84.

Resolved in the negative, and amendment disagreed to accordingly.

Lord McIntosh of Haringey: I beg to move that the House do now resume. In moving this Motion I suggest that the Committee stage of the Bill should not reconvene before 8.35 p.m.

Moved accordingly, and, on Question, Motion agreed to.
	House resumed.

Prevention of Terrorism (Temporary Provisions) Act 1989 (Continuance) Order 2000

Lord Bassam of Brighton: rose to move, That the draft order laid before the House on 3rd March be approved [12th Report from the Joint Committee].

Lord Bassam of Brighton: My Lords, in introducing this order in another place last week my right honourable friend the Home Secretary indicated that this could be the final debate on the renewal of the Prevention of Terrorism Act if, as the Government hoped, it was replaced with a new Terrorism Bill to be debated in this House shortly. The proposal to replace the Act recognises the sad fact that even the establishment of a lasting peace in Northern Ireland does not entirely remove the threat of terrorism. But I do not propose to dwell too much on the proposed new legislation which noble Lords will soon have an opportunity to debate in detail. Instead, I shall concentrate on the renewal of the existing Act.
	We must ensure that those in the front line against terrorism continue to have all the tools necessary to do their job effectively. The PTA is a critical part of that tool kit, and that is why it is essential for it to be renewed, probably for the last time, until, subject to parliamentary approval, new legislation can be brought into force.
	I should first comment on the human rights aspect of the order. Noble Lords will recall that the Government undertook on 2nd November 1999 to ensure that where a draft order was subject to the affirmative resolution procedure the Minister moving the instrument would inform Parliament whether he or she was satisfied as to its compatibility with convention rights. This House will have expected my right honourable friend the Home Secretary and me to have given this matter very careful consideration. The question of human rights has been raised on many occasions in respect of this particular piece of legislation, not least in comments by members of the present Government while in opposition.
	The mechanism for extending detention under Section 14 of the Act has caused most disquiet over the years. Detention can be for a period of only 48 hours unless the Secretary of State extends the period for anything up to a further five days on application by the police. In the case of Brogan this was found to be at odds with the requirement under Article 5.3 of the ECHR to bring a detainee promptly before a judge or other judicial power. The Brogan case led the UK Government to derogate from that requirement under Article 15.1 of the convention in respect of terrorism connected with the affairs of Northern Ireland. This was notified to the Council of Europe on 23rd December 1988.
	Noble Lords will have the opportunity to note that the Terrorism Bill seeks to address this particular concern by requiring applications for extension of detention to be made to a judge, sheriff or designated magistrate, as the case may be. We believe that the judicial character of the hearing for an extension will fulfil the procedural requirements of the convention in relation to Article 5.3 and enable the removal of the derogation. In the meantime, the derogation continues to be necessary.
	The House may also have been aware of judgments last year in the Divisional Court in respect of Sections 16A and 16B of the Act in the case of Kebilene and others. Noble Lords may recall that Section 16A makes it an offence to be in possession of an article in circumstances which give rise to a reasonable suspicion that it is possessed for a purpose connected with the commission, preparation or instigation of acts of terrorism, while Section 16B makes it an offence to collect or record any information which is of such a nature as is likely to be useful to terrorists, or to possess a record or document containing such information, unless the accused can show that he has lawful authority or reasonable excuse.
	The Divisional Court held that both offences breached Article 6.2 of the ECHR because the reverse burden of proof provided for violated the presumption of innocence. But in the Judicial Committee of this House the Divisional Court's finding regarding Section 16A was not upheld, and proceedings in the case under Section 16B had meanwhile been discontinued.
	The Government continue to believe that these offences are a proportionate response to the circumstances of the fight against terrorism. I hope that the House will understand if in the time available I restrict my detailed comments on the issue of ECHR compatibility to those provisions and I report that, like my right honourable friend the Home Secretary, I am satisfied that all of the provisions that we seek to renew tonight comply with convention rights.
	Before I move away completely from discussion of ECHR issues I turn to the report on the operation of the Act in 1999 prepared by John Rowe, QC. As ever, I am indebted to him for the care and attention that has gone into the compilation of that report.
	It is clear that Mr Rowe has sought deliberately in the course of his review to assess the degree of awareness of human rights issues. For example, at paragraph 21 he says:
	"I asked questions to see how far [officials, departments and members of the security forces] were aware of the need to avoid arbitrariness, or the need to monitor regularly the exercise of the particular power. On many occasions the person himself or herself volunteered, before I mentioned it, the question of the HRA, or breach of human rights. I learned that in many spheres there is active training going on about the elements of the HRA and human rights; and the general impression I received was that people are aware of the need to have in mind the Convention".
	Like my right honourable friend the Home Secretary, I should say how encouraging I found those comments to be.
	Now let me look at the events of the past 12 months. In the context of Northern Ireland it has been a period of mixed emotions. Full implementation of the Good Friday agreement has dominated the headlines. The year has been characterised by periods of immense optimism interspersed with the concern that the momentum generated by the signing of the agreement in April 1998 was slipping and the decision of the House and my right honourable friend the Secretary of State for Northern Ireland to suspend the devolved institutions.
	In respect of terrorism related to the affairs of Northern Ireland, 1999 witnessed a welcome reduction in terrorist activity both in Northern Ireland and in Great Britain. Even so, there were 124 shootings and 82 bombing incidents recorded in Northern Ireland; and there we see still tragic and unnecessary deaths. In all, seven people died in Northern Ireland in 1999 as a consequence of terrorist violence. Perhaps I may remind the House of two of those deaths. In June, Elizabeth O'Neill was killed in her home by a pipe bomb thrown through the window. And the House will, I am sure, recall the horror of the death, just over a year ago, of Rosemary Nelson, murdered in an act of sheer brutality as she left her home in her car. They are terrible reminders of a time all of us in this House and beyond wish so much to see relegated to the past. But they are reminders, too, of why we should not be distracted from the search for peace.
	We need not look far either to be reminded of the threat international terrorism poses. Two explosions in the space of an hour in the centre of Madrid left an army officer dead and heralded the start of a new campaign of violence by the Basque separatist group, ETA, following the announcement in December of an end to its 14-month cease-fire. Further attacks, sadly, have since followed. The Italian terrorist group, the Red Brigade, has also recently resumed attacks.
	These are not, of course, campaigns that will necessarily affect our shores, but the occupation early last year of the Greek Embassy in London, and similar types of demonstrations in Europe and further afield in support of the PKK leader, Abdullah Ocalan, show only too readily that terrorists do not recognise borders and will ply their trade wherever they can. We shall continue to play our role on the international stage and do our utmost to secure peace and stability, but it is equally important to have in place effective counter-terrorist measures to deter those who would seek to perpetrate terror and to assist those whose task it is to investigate their crimes.
	Perhaps I may at this point remind noble Lords that only last month my right honourable friend the Home Secretary paid tribute, and rightly so, to the skill, patience and professionalism of Essex police in bringing to a successful conclusion a hijacking incident at Stansted. I am sure that noble Lords will share that sentiment.
	I return now to the report prepared by Mr John Rowe QC which informs our debate today. Mr Rowe concludes that the powers in the PTA, including the powers of arrest, detention and stop and search, were used carefully, appropriately and proportionately in 1999. There are similar comments on the importance of port powers to the overall police effort, and he is satisfied that they have been used properly. This is very reassuring, and I am pleased to note his conclusion that they should remain in force.
	I have noted in particular his comments on the security situation in Northern Ireland. I have already recognised that there are still those in Northern Ireland who remain wedded to the old ways of violence and intimidation; and, tragically, there has been evidence supporting his assertion that attacks on the community were in preparation. Only last week police in Northern Ireland discovered 500 pounds of explosives in a vehicle as a result of which four people have, I understand, been charged with offences related to the possession of explosives.
	But we should not lose our sense of perspective. Politicians on all sides are striving to make politics work, to make those who advocate the use of violence realise the futility of their ways, and the overall level of violence remains far below that experienced prior to the main paramilitary cease-fires.
	Looking at some of the other issues raised in Mr Rowe's report, I was pleased also to note the reference to the smaller number of complaints from the public about the operation of the Act in 1999. It is pleasing also that Mr Rowe felt able to comment on the apparent care that was taken when looking into those complaints.
	In conclusion, while the Terrorism Bill to which I have referred will, I believe, provide new, modernised counter-terrorism legislation proportionate to the threat, we cannot in the meantime expect those fighting terrorism to do so without the present powers of the PTA. It is vital that we maintain continuity and that the existing powers remain available for the next few months through the renewal of the current legislation until new legislation is enacted and can be implemented. I beg to move.
	Moved, That the draft order laid before the House on 3rd March be approved [12th Report from the Joint Committee].--(Lord Bassam of Brighton.)

Lord Cope of Berkeley: My Lords, I am grateful to the Minister for introducing the order. It is clear from Mr Rowe's extremely clear report that it is right and necessary to extend the Prevention of Terrorism Act, as the order does, for a further 12 months. I join with the Minister in thanking Mr Rowe for his diligent and very thorough review of the workings of the various provisions.
	As the Minister said, before long we shall debate at some length the new Terrorism Bill. Therefore I do not need to discuss much of the detail at too great a length at this point. However, I am satisfied both from Mr Rowe's report and my own observations that the threats from terrorism to our democracy and to our fellow citizens in Northern Ireland and Great Britain remain real and dangerous.
	The situation as regards Northern Ireland is not as bad as it has been at some periods over the past few decades, but the Minister referred rightly to the murders and beatings of recent months and the findings of explosives and other bomb-making equipment. Mr Rowe records that in his report, together with evidence of planning, preparation and training. This is no time to relax.
	We all know, too, as Irish history tells us, that when in the past there has been a settlement there has also been, I think on every occasion, a break-away group of those who did not accept the terms agreed but carried on with violence. At present the Good Friday agreement has its problems, as we know. There is, therefore, double reason to continue the protection to our people, our society and democracy against both break-away groups and perhaps mainstream groups of terrorists. One can be very sure that if they thought that we had dropped our guard in the slightest, some would seek to take advantage of that apparent weakness.
	I want to draw attention to three aspects of Mr Rowe's report. First, in Chapter 3 he records that the number of complaints against the usage of port powers--one of the most important powers in this legislation--is "infinitesimally small". In a later paragraph he states that there were only 31 complaints resulting from 16,000 patrols in Northern Ireland. We can take comfort from those figures that the powers are not being misused but are being properly used.
	The second matter concerns terrorists' finance. Since having responsibility for these matters in Northern Ireland, I have emphasised the importance of that aspect. Extortion and rackets form the basis of a high proportion of terrorist crime; that is terrorists of all opinions. Mr Rowe points out that in the past 12 months there have been an average of eight armed robberies a week in Northern Ireland. They are in addition to the counterfeiting, extortion and so forth, referred to in paragraph 36. That is an important aspect and it must receive great attention.
	Finally, I was interested in Mr Rowe's comments in Chapter 5 on the international situation. In paragraph 41, he points out:
	"Members of dissident and separatist groups reside here, or visit conspirators here, and especially raise money here. Our laws are liberal".
	Later, he states:
	"Furthermore, the United Kingdom may be used as a base from which to make attacks elsewhere".
	That shows that not only is the Irish dimension addressed by these powers, but so is the international terrorist situation. The United Kingdom has important responsibilities for the preservation of democracy and the protection of our citizens in countries other than ours. We shall return to the matter during our debates on the Terrorism Bill, in particular Mr Rowe's points in Chapter 8 about the funding of international terrorism and the seizure of assets.
	As regards this order, the Home Secretary assured another place that this year there are no gaps in it--there was previously an unfortunate gap--and that is a welcome reassurance. I am in no doubt about the need for the order and I believe that the House should support it.

Lord McNally: My Lords, I am pleased to follow the noble Lord, Lord Cope, speaking as he does with experience of both the Northern Ireland Office and the Home Office. In particular, I associate myself with his concluding remarks. When we debate the Terrorism Bill, which deals with broader issues, we must take into account the global nature of terrorism and the need to keep our domestic law as free as possible while recognising that there are those willing to use that freedom and liberal approach abusively in order to further their interests in foreign counties. That will be a big issue in our debates on that Bill.
	As the Minister indicated, this is probably the last time we shall discuss this order in this form. My right honourable friend Alan Beith, in another place and at another time, described this legislation as a regrettable necessity. That remains our view.
	A year ago we were much more optimistic. Sadly, our hope that the Good Friday agreement would quickly lead to normality proved over-optimistic. That does not mean that we should give up the efforts to further the process. As President Clinton reminded the main protagonists in Washington last week, it remains the best hope for this generation of achieving a lasting peace in Northern Ireland.
	But even if Northern Ireland takes its opportunity, it is clear that terrorism in the 21st century will know no frontiers. The Liberal Democrats see the need for the legislation and for the security services to protect our way of life from terrorist violence. But extremism cannot be fought and overcome unless democratic societies retain the support of their people. To do that, the security services and security legislation have to be kept under review and made subject to parliamentary accountability. So our first base is that democratic societies have a right and duty to protect themselves against the terrorists.
	However, the powers which the state takes should be no more than sufficient to the task. I liked the Minister's phrase that they should be proportionate to the threat. If, in the fight against terrorism, we constrict our liberties and civil rights, we give a victory to the terrorists. Therefore, we on these Benches make no apology for saying that we will scrutinise anti-terrorist legislation with an eye to the implications for civil liberties and human rights.
	Members on both Front Benches mentioned the report of J.J. Rowe QC. I have had the pleasure of meeting him; he is a most impressive public servant. That is reflected in the thoroughness of his report. Like the Minister, I was impressed by his assessment that he found care and fairness on the part of those exercising the Prevention of Terrorism (Temporary Provisions) Act. He also stated that there was active training on the implications of the Human Rights Act and an awareness of the need to have in mind the convention when operating these powers. That is greatly reassuring for Parliament.
	The Minister mentioned the decades of terrorism that we have had to endure. It is 25 years since my noble friend Lord Jenkins produced the first Prevention of Terrorism (Temporary Provisions) Act. Yet it is amazing how much terrorism has failed. No atrocity or outrage has moved opinion in Parliament or in the country to make us weaken our resolve as regards our commitments and duties in Northern Ireland. The issue in Northern Ireland is not British imperialism, but the ability and the capacity of the people of Northern Ireland to find a way to live one with another in peace. I am afraid that on that the jury is still out.
	We note with approval that the Government have excluded internment without trial and exclusion orders from the measures before the House tonight. These are, I believe, genuine confidence-building measures against the background of the peace process. It would be even more reassuring to hope that the terrorist organisations had stood down on training and recruitment. Alas, that is not the finding of Mr Rowe in his report. He believes that training and recruitment continue. If that is the case, what we have is not a ceasefire and a peace process, but an armed truce.
	The reality of terrorism was brought home to me by an article in this morning's Independent on the death of Tim Parry in Warrington seven years ago today. It stated:
	"He has told the story a thousand times but there is still a rawness in Colin Parry's minute recollections of his 12 year-old son's last morning. 'I remember giving him a big squeeze', said Mr Parry. 'His head came up to here, beneath my chin. It fitted into you nicely". Father and son went their separate ways and by nightfall that Saturday 'a surgeon in his greens' was standing before Mr Parry, tipping a St Christopher chain and a watch out of an envelope. They were Tim's. It was the first confirmation that his son had been injured, let alone killed, by that 1993 IRA bomb attack on Warrington".
	In its starkness, it brings home the vile futility and wickedness of terrorism. The report goes on to explain that Warrington's response is today's opening of the Tim Parry/Jonathan Ball Young People's Centre. Jonathan Ball was a 3 year-old, also killed at Warrington.
	Our response should be threefold: first, to continue to work for the peaceful resolution of conflict in Northern Ireland and elsewhere; secondly, to continue to resist terrorism and extremism; and, thirdly, to continue to protect civil and human rights. Only by resisting terrorism and protecting basic freedoms do we honour and keep faith with Tim Parry, Jonathan Ball and all the others who have been killed and maimed by terrorists over the years. These Benches support the renewal of this order.

Lord Bassam of Brighton: My Lords, I am extremely grateful for the support shown from the Opposition Benches by the noble Lords, Lord Cope and Lord McNally, for the renewal of the order. I, too, feel very moved by the description which the noble Lord, Lord McNally, repeated to us from the Independent newspaper. It reminds us in a timely way of why we need this legislation on the statute book and why we need the legislation that we shall bring forward later in this parliamentary Session. The discussions around that legislation will obviously be important because they will frame the way in which we tackle the threat of terrorism over the next years and decades.
	I have no doubt that we shall continue to require that legislation. It is important and it provides our society and communities with the kind of protection that legislation has given over the past 25 years. I do not wish to go into great detail about what we shall bring forward. However, I believe that its importance lies in continuing the accountability to which the noble Lord, Lord McNally, referred. It continues to demonstrate the Government's vigilance and the continued vigilance that extends, I believe, across the parties.
	I hope that over time the terrorist threat in Northern Ireland will diminish further. Although the peace process may not be making the rapid progress that your Lordships' House would wish to see, there have been encouraging signs that the civilian population, quite understandably, retains its enthusiasm for peace, and that the activity of terrorists has continued to diminish. However, we need to be ever watchful. This legislation will enable us to do that within a framework of the law and of democratic accountability. That is the tradition to which we must adhere. For those reasons, I am grateful that this evening noble Lords have given their support to the legislation. I commend the Motion.

On Question, Motion agreed to.

Lord Bach: My Lords, I beg to move that the House do now adjourn during pleasure until 8.35 p.m.

Moved accordingly, and, on Question, Motion agreed to.
	[The Sitting was suspended from 8.3 to 8.35 p.m.]

Financial Services and Markets Bill

House again in Committee.
	Clause 10 [Reviews]:

Lord Saatchi: moved Amendment No. 79:
	Page 4, line 41, leave out ("may") and insert ("must on the second anniversary of the day on which section 1 comes into force and every two years thereafter").

Lord Saatchi: Amendments Nos. 79 and 81 to 83 relate to the intervals at which reviews of the FSA should take place. I should like to discuss also the next group of amendments--Amendments Nos. 80 and 84 to 86--which deal with who will carry out the reviews. If it is for the convenience of the Committee, I shall try to cover the key issues in relation to those amendments.
	One would have thought that having a review of the FSA would be a reasonable suggestion. But extraordinarily, there is no provision for it in the Bill. The Bill states:
	"The Treasury may appoint an independent person to conduct a review".
	However, on the other hand, it may decide not to conduct a review. It is up the Treasury. Therefore the clause is what is called an enabling clause.
	Any doubt about that is removed by the Explanatory Memorandum which states that,
	"the Treasury can commission independent reviews".
	The fact is that the Treasury can do just about what it likes under the clause. Not only can it decide whether to have a review in subsection (1), but in subsection (2) it can decide to limit the scope of the review, and subsection (3) specifically excludes the opportunity for a fundamental review. Nor is the independence of the reviewer guaranteed. The Treasury can also decide what "independence" means. Subsection (7) states:
	"'Independent' means appearing to the Treasury to be independent of the Authority".
	We believe that the Bill hands too much power to the Treasury. The enabling provisions amount to an unacceptable level of discretion in the hands of the Treasury and we should like to find ways to limit it. I hope that the Minister will concede that reviews should take place, not merely when the Treasury decides but even when the Treasury and Treasury Ministers might not find it convenient to have a review. I hope that he will concede also that leaving the scope of the review entirely in the hands of the Treasury cannot be satisfactory. I do not believe that the industry considers that to be satisfactory.
	I expect that in a few moments the Minister will say that the FSA is accountable to the Treasury and the Treasury is accountable to Parliament. He will probably point out also that there are the consumer and practitioner panels to assist with the review process. It is true that the Government have conceded some form of review. The clause as it stands was a concession after consultation. But their concession starts to disappear the more that one looks at it. Is it not true that, as we heard earlier, the consumer and practitioner panels have serious shortcomings, as many noble Lords have said? It is not clear how much notice the FSA and the Treasury will need to take of the panels' recommendations. The chain of accountability from the FSA and the Treasury to Parliament is weak and it does away with questions on the Floor of the House. We believe that we need something stronger for such a powerful body.
	Where can we go to get something better? That is where Amendments Nos. 80 and 84 to 86 arise. They deal with the question of who should conduct reviews and they suggest that the Comptroller and Auditor General of the National Audit Office should take that role. One cannot compare the Treasury and the independence of Treasury Ministers with the NAO's role. Treasury Ministers have a government to run and a party political agenda to pursue. The NAO is and has on many occasions been seen to be unimpeachably independent. It has the power to produce reports which go to the Public Accounts Select Committee. It can provide a more thorough and detailed form of parliamentary scrutiny than the proposed system. The NAO already conducts reviews of other public bodies, some of which include the other principal regulators, such as those for the electricity, gas, rail, telecom and water industries.
	The Government have argued before that the FSA does not receive public funds, so it should not be scrutinised as a public body and should not be subjected to such a review. But who can argue with the fact that Parliament is entitled to ask for an independent full review of a body in which it places so much power and public trust? That is what the two groups of amendments seek to achieve. I beg to move.

Lord Barnett: I have been reluctant to participate in the debates to lengthen the time that the noble Lord, Lord Saatchi, wishes to take on amendments. However, I have a good deal of sympathy with all that he says--he was extremely brief--about the Comptroller and Auditor General. I declare a past interest, in the sense that I have been chairman of the Public Accounts Select Committee of another place, where I had quite considerable experience with Comptrollers and Auditors General. All of them, without exception, were excellent people. I do not know the current Comptroller and Auditor General, Sir John Bourn, as well as the others, but I gather that he is excellent. I note that the noble Lord could not help but refer to the following grouping of amendments, because once one says "must" instead of "may" one must mention to whom one is referring. He rightly talked about the Comptroller and Auditor General. I have a great deal of sympathy with his view.
	On the other hand, I am bound to say that to lay down categorically that the Government, or the authority, must appoint a particular individual, no matter how good, is not sensible. (It sounds as though someone agrees with me--or disagrees, as the case may be. I hope that they will not be ejected too forcibly, whoever it may be.) It sounds rather like my noble friend Lord McIntosh to say, "I have a great deal of sympathy, but--", but I have great sympathy with the amendment because if, by any chance, the authority were to appoint the comptroller, in certain instances I should be extremely pleased to see that happen. I do not know whether this does in fact sound like my noble friend. He may in fact be about to disagree with me and to say that he will accept the noble Lord's amendment. It would be foolish to do so. Therefore, I hope that my noble friend will not accept the amendment. If we are pressed to a vote, I am bound to say that I shall oppose the noble Lord, Lord Saatchi, much as I should regret to do so. He knows how fond of him I am and that I know how much he cares about his public service which demands that he should move such amendments.

Baroness O'Cathain: I wonder whether the noble Lord, Lord Barnett, realised what he actually said. He said that he believed that there was some merit in the Comptroller and Auditor General being involved, but that he would object to that being put on the face of the Bill. There is a case for limiting the powers of the Treasury. Everyone seems to go terribly tippy-toed every time the word "Treasury" is mentioned, as though its Ministers are somehow on a completely different planet from the rest of us. Of course they are, I suppose, but should they be? After all, they are servants of the state and they probably still have to do what is right for the general populace. We are kow- towing too much to the Treasury. I should like to see the amendment carried--or, at least, agreed to. I hope that the Minister will feel that way too.

Lord Boardman: For an awful moment I believed I was going to find myself in complete agreement with the noble Lord, Lord Barnett. I have agreed with him from time to time, when he has been sensible. Tonight he began with support for the appointment of the Comptroller and Auditor General, which I entirely endorse. He is absolutely right. That appointment should be made. The Bill describes the post as "an independent person". No one has the hallmark of an independent person better than the Comptroller and Auditor General. Where I disagree was that in the endorsement of the noble Lord, Lord Barnett, it was left open as to whether or not "may" should be used. In my view, "must" is correct. The independent person must be the Comptroller and Auditor General. For that reason I support the amendment.

Lord Newby: I shall deal with the two groups of amendments separately. The first amendment seeks a two-year review covering the economy, efficiency and effectiveness of the FSA. I can see why that provision is needed in the Bill, but having had some discussion on Thursday about the annual report which the FSA will be required to provide on the assumption that our extremely sensible amendment proposing a joint committee of both Houses were acted on, I wonder whether such a wide-ranging report--a kind of "Ofsted for the FSA" every two years--is absolutely necessary, in particular, during the first period of operation of the body when it is setting itself up. The first set of amendments is probably rather too prescriptive.
	On these Benches we see a logic in the Comptroller and Auditor General being specified, in that he is the servant of Parliament. We are relying on Parliament in our concept of the operation of the FSA to be the body which exercises effective control. There is a strong prima facie case for that. However, there are many other bodies which could carry out the role which the Comptroller and Auditor General might perform. They may do so more effectively and there is an argument for having some proper competition. Perhaps we should have a look to see who else might be able to do the job most effectively and most cost-effectively. Equally, even if it is not the Comptroller and Auditor General, a body appointed to look into the effectiveness of the FSA could report to Parliament just as well as the Comptroller and Auditor General.

Lord Jenkin of Roding: I wonder whether the noble Lord might give way. Was he about to suggest that perhaps a leading firm of chartered accounts might be invited to do the job?

Lord Newby: There is a range of possible bodies which could do the job.

Lord Elton: One of the great anxieties which the Bill stirs in my heart is the impenetrability of the actions of the new body to parliamentary inspection. The great advantage of my noble friend Lord Saatchi's proposal in the second group of amendments is that the FSA shall be made open to inspection by the Comptroller and Auditor General who, under the 1983 Act is, I understand, an officer of the House of Commons, thus bringing parliamentary inspection back into the circuit, which is so missing. It is a neat and sensible solution which I warmly endorse.

Lord Faulkner of Worcester: I do not disagree with the sentiments expressed in this debate. However, I want to ask the noble Lord, Lord Saatchi, and his colleagues on the Opposition Front Bench why they have changed tack from the line that their colleagues adopted in another place. On Report they proposed that the FSA should be subject to independent scrutiny in 2002 but did not specify who should be responsible, and said that the review should be conducted, not at two-year intervals, but at five-year intervals. In another place there was no reference made to the Comptroller and Auditor General.
	Is it the case that if the Comptroller and Auditor General is involved in such a process, the only body that exercises scrutiny is the Public Accounts Committee in another place? Along with the noble Lord, Lord Newby, I would welcome the continuation of the Joint Committee approach which examined the Bill in its pre-legislative mode. I would not have thought that the Public Accounts Committee was the most appropriate body to exercise that function. Indeed, it is interesting to see that the plan and the budget of the FSA was considered as recently as last Tuesday, not by the Public Accounts Committee, but by the Treasury Select Committee in another place. It strikes me that we are in danger of establishing rather too much parliamentary scrutiny in another place and denying ourselves the opportunity of carrying out the role in this House.
	Another point is that the non-executive board members of the FSA are given the specific responsibility of controlling the budget under Schedule 1 to the Bill. I am fearful that if we go too far down that road we shall find that the role of the non-executive board members will be greatly diminished. I hope that that is something that can be addressed as we consider the issue further.

Lord Jenkin of Roding: The noble Lord, Lord Faulkner of Worcester, chides my noble friends because they have not put forward the same amendment in this place as was tabled by my right honourable and honourable friends in another place. As the Government rejected the amendment tabled in another place, surely we are entitled to try another one. Ministers may say the same in both Houses, but happily Oppositions do not. When the noble Lord has been in this House a little longer and sits on this side of the House--that may happen sooner than he believes--he will realise that that is one of the advantages.
	Having had some experience of such matters, I am impressed by the amount of support for the idea that the Comptroller and Auditor General should have responsibility. As a former Financial Secretary at the Treasury, I was an ex-officio member of the Public Accounts Committee in another place. I believe that proposal is right. The alternative, which may be considered, is the Audit Commission.
	However, I believe there may be room for doubt on whether the period of two years is correct. That is a short period. Conducting a review will be a long process. It will be like painting the Forth Bridge. As soon as the procedure is started for one term, it will need to be started again. I shall listen to what the Minister has to say, but I believe the idea of the linkage mentioned by the noble Lord, Lord Newby, between the Comptroller and Auditor General and, as I hope it will be, a Joint Committee of both Houses, is a good one. I do not believe that the Comptroller and Auditor General has to report to the Public Accounts Committee. If that turns out to be the law, we can amend that law in this case.
	Has the Minister yet had time to hold discussions with his noble friend the Deputy Chief Whip to find out whether there may be a possibility of a Joint Committee being appointed to undertake the parliamentary scrutiny? If the Comptroller and Auditor General conducts reviews, not necessarily every two years, and reports to a Joint Committee, I believe that that would provide a pretty good chain of command whereby this uniquely powerful institution can be subject to proper professional and parliamentary scrutiny.

Lord Elton: In view of the rapidity with which these markets develop and the relative slowness with which committees come to conclusions, does my noble friend believe that a quinquennial meeting, taking a year to report, will look more at history than current affairs?

Lord Jenkin of Roding: I did not say the period should be five years. I felt that every two years would be too frequent. Somewhere in between, say every three years, may be better.

Lord Burns: I want to join with those who have expressed their admiration for the Comptroller and Auditor General. In my previous life I worked closely with him. I have been scrutinised and audited by him. Sometimes such a process went well and sometimes not so well. I can vouchsafe for his dedication and skill. I join with the noble Lord, Lord Barnett, in questioning whether it is necessary to give him a monopoly position. In my previous life we had an ongoing debate about the Comptroller and Auditor General and whether he should follow public money wherever it goes. Of course, with contracting out and with more services being bought in, the border line has become more difficult to define.
	Here we have a private sector company with no taxpayers' money involved and the finance for the organisation will come from the private sector. Therefore, it seems strange that we should give the Comptroller and Auditor General a monopoly position. There is nothing to stop the Treasury appointing him to this task. But why should he get the job by default rather than through some process of competition? I am reluctant that this situation should be part of the legislation rather than being considered on an ongoing basis.

Lord McIntosh of Haringey: I am sorry to leave the tape recorder behind. I am thoroughly antagonistic to all these amendments, except government Amendment No. 83. I believe that they would severely diminish the effectiveness of the value for money review procedure proposed under Clause 10. Currently Clause 10 provides the Treasury with the power to appoint an independent person to conduct a review of the efficiency, economy and effectiveness with which the FSA has used its resources to discharge its functions--that is to say, a value for money audit. It is intended to be a flexible power allowing the Treasury to commission reviews on a large scale or into particular aspects of the FSA's operations as often as appropriate.
	Amendments Nos. 79, 81 and 82 would remove that useful element of flexibility. They would set in stone a requirement to have a value for money review every two years following the coming into force of the Bill and on no other occasion and covering nothing except the whole of the activities of the FSA.
	The reason that there is no provision in the Bill requiring value for money reviews to be carried out at a particular time is a simple one. We see nothing to be gained by holding a review for the sake of it and quite a lot could be lost by having it at regular fixed periods.
	Clearly, reviews are an important tool in keeping costs down and ensuring that the regulator carries out his job efficiently, but they should only take place when necessary. Reviews are not cheap. They tie up a lot of the time of staff and management and divert the regulator from the job of regulation. The FSA has expressed concerns, which I share, that there could be a planning blight in the run-up to the review.
	If a value for money review happens more often than is necessary, less often than necessary or at the wrong time, that could have the opposite effect to the one intended. The amendment would also have the unfortunate effect of making it impossible for the Treasury to commission a review at other times. Depending on the circumstances, two years may be too short a gap between reviews, as some noble Lords believe, so we need a flexible power.
	We have made it clear that we shall hold a review if and when there is evidence suggesting that that would be useful. There is nothing unusual in that. Indeed, it is the same approach taken in the National Audit Act 1983 which says that the Comptroller and Auditor General may carry out examinations of the economy, efficiency and effectiveness of departments. It does not say that he must do so.
	We will not be short of indicators as to when a review is appropriate. The non-executive directors will conduct a report annually on whether the FSA is using its resources in the most effective and economic way. There is a great deal of transparency around the FSA's budgeting and the setting of fees for regulated persons. Of course, it is open to anyone to suggest to the Treasury that a review may be appropriate. It could be the Treasury Select Committee of another place or, if the Deputy Chief Whip were so minded, it could be a review of a joint committee or a committee of this House. Incidentally, at the present time, no discussions have taken place with the usual channels on this point.
	Of course, Treasury Ministers will be answerable to the House for their use of the powers conferred by Clause 10, as they will be accountable for the use of any other powers which they can exercise under the Bill. I thought that the attack of the Opposition would be to claim that it is the FSA which is the monster that has got out of control. However, we hear that it is the Treasury, which is accountable, but which appears to be out of control.
	Amendment No. 82 presents the same problem. The deletion of subsections (2) and (3) would remove the restrictions on what area of the FSA's work the reviewer could examine. Subsection (2) is simply a reflection of the fact that the Treasury might decide to commission a review for a particular purpose. If, for example, a review was triggered by events in the building society sector, the Treasury might wish to direct the reviewer to look at the FSA's work in regulating building societies, as opposed to, say, insurance regulation.
	Subsection (3) is rather different. Under the National Audit Office Act 1983, the Comptroller and Auditor General has the right to carry out reviews of the economy, efficiency and effectiveness of spending by government departments and various other bodies. However, the same statute goes on specifically to prohibit the comptroller from examining the merits of the policy objective underlying this spending. I must point out to noble Lords that this was enacted under a Conservative administration. It is now being attacked from the Opposition Front Bench.
	This does not mean, of course, that these policies should be beyond question, but rather that it would compromise the independent nature of the comptroller's office for him to become involved in these policy questions. Subsection (3) plays a similar role in respect of this Bill. That is not to say that the FSA's performance in terms of making policy is not to be open to scrutiny. The Bill provides for a number of ways in which the FSA can be called to account in respect of its policy and principles.
	Schedule 1 provides that it must comment in its annual report on how its regulatory objectives have been met. The report will be laid before Parliament and will be open to discussion at a public meeting. In addition, Clause 7 requires the FSA to make arrangements for consulting practitioners and consumers about its policies and practices, including the consumer and practitioner panels. Furthermore, it would always be open to committees of this House or of another place to decide that they wished to examine the FSA's work, just as a committee of this House examines the work of the Monetary Policy Committee of the Bank of England.
	Finally, there is a government amendment to this clause, Amendment No. 83, which I commend to the Committee. Its purpose is to allow reviews commissioned under Clause 10 to cover any functions of the FSA under Part VI of the Bill, which is the part concerned with official listings. We shall come to debate the changes that we are making to take account of the proposed transfer of the competent authority function from the London Stock Exchange to the FSA when we debate Part VI of the Bill in due course. However, it is necessary to put in this amendment first.
	I shall now turn to the second group of amendments which concern the role of the Comptroller and Auditor General. Again, these would restrict the scope of the Treasury's powers under Clauses 10 and 11. At present, the Treasury can commission a value-for-money review of some or all of the functions of the FSA. The clause allows the Treasury to appoint any person it thinks is best equipped to do the job, provided that that person is someone appearing to the Treasury to be independent. The amendments would remove the Treasury's discretion, placing instead a duty on the Comptroller and Auditor General to carry out reviews.
	The key to Clause 10 is flexibility; getting a review of the right things at the right time by the right person. The right person might well be the Comptroller and Auditor General. There is nothing in the Bill which would preclude the Treasury from asking him to carry out this task. However, I do not believe that we would gain anything by making it a requirement that the Treasury should appoint him on every occasion. We would lose some useful flexibility.
	This is no reflection on the expertise and professionalism of the comptroller or his staff at the National Audit Office. It is simply the case that it may be that a body more familiar with how the financial markets work might be more appropriate in a particular instance. I do not believe that the NAO would always be the most appropriate body, given its separate role in relation to local government and the National Health Service. For example, in 1996, the value-for-money review of the Securities and Investment Board was carried out by a private sector organisation.
	I do not think that there is very much between us in what we seek, but I believe that the amendments of the noble Lord, Lord Saatchi, would diminish the value and effectiveness of the review procedure provided in Clause 10 of the Bill. I hope that he will not press them.

Lord Saatchi: Given the Minister's response, I have a suggestion on how drastically to cut short our deliberations on the Bill this evening and, indeed, all the other stages. We could scrap the Bill as it is presently drafted and have instead a one-line Bill. That would say something along the lines of, "The FSA will be a body which will carry out duties as determined by the Treasury from time to time".
	What we have heard from the Minister suggests that he wants actively to maintain the maximum possible degree of discretion and flexibility for the Treasury. However, we want actively to do the reverse; namely, to limit the Treasury's powers of discretion and flexibility. Surely this is now becoming the main gulf between the Government and the Opposition on this Bill. It is the theme that we have rehearsed on the subject of the chairman of the FSA, the role of its non-executive directors, the construct of the panels and their rights, obligations and duties, and now, on the subject of the review of the FSA. A fundamental gap is emerging between us in our approach. The Minister wishes to see less prescription and more flexibility, while we wish to see the exact opposite. We shall see how this can be worked out on Report.
	Perhaps I may respond to the comments of the noble Lord, Lord Faulkner, on the question of timing. As the noble Lord will have gathered from the speeches of my noble friends, we are not particularly set on one period rather than another. However, we are determined that there ought to be a period. The point as regards timing should not be one of the Minister's discretions for the Treasury.
	The noble Lord's second point concerned who should carry out such reviews. I think that he can rely on the fact that we are a "joined up" Opposition. For that reason, what the noble Lord hears from this Front Bench is joined up to my right honourable friends in another place. As regards which committee might emerge as the ideal committee to carry out reviews, that would depend very much on the Minister's response to other amendments to be moved later. However, for the time being, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.
	[Amendments Nos. 80 to 82 not moved.]

Lord McIntosh of Haringey: moved Amendment No. 83:
	Page 5, line 5, at end insert ("or in exercising functions under Part VI").

Lord McIntosh of Haringey: I have already spoken to this amendment. I beg to move.

On Question, amendment agreed to.
	[Amendments Nos. 84 and 85 not moved.]
	Clause 10, as amended, agreed to.
	Clause 11 [Right to obtain documents and information]:
	[Amendment No. 86 not moved.]
	Clause 11 agreed to.
	Clause 12 [Cases in which the Treasury may arrange independent inquiries]:

Lord Kingsland: moved Amendment No. 87:
	Page 5, line 40, leave out ("serious").

Lord Kingsland: Amendments Nos. 87 and 90 to 93 relate to inquiries, which are dealt with under Clauses 12 to 16.
	Amendment No. 87 is to page 5, line 40. As members of the Committee are aware, Clause 12 allows the Treasury to arrange for independent inquiries to be held in certain circumstances. The first set of circumstances, in Clause 12(2), is where,
	"events have occurred in relation to [either] a collective investment scheme, or ... a person who is, or was at the time of the events, carrying on a regulated activity ... which posed or could have posed a grave risk to the financial system or caused or risked causing significant damage to the interests of consumers".
	However, there is a further requirement in Clause 12(2)(b) that,
	"those events might not have occurred, or the risk or damage might have been reduced, but for a serious failure in",
	the regulatory system or the operation of that system.
	Amendment No. 87 deletes the word "serious" in Clause 12(2)(b) on the basis that, if the events which occurred had posed,
	"a grave risk to the financial system or caused or risked causing significant damage to the interests of consumers",
	it should not be necessary to establish that those events,
	"might not have occurred ... but for a serious failure",
	in the regulatory system or the operation of that system.
	I now turn to the remaining Amendments Nos. 90 to 93 to Clause 15. If an independent inquiry as contemplated by Clause 12 takes place, the person holding the inquiry must make a written report to the Treasury. Under Clause 15(2),
	"The Treasury may publish the whole, or any part, of the report".
	Amendment No. 90 would require the Treasury to publish the whole of the report. Amendment No. 91 is a consequential amendment and relates to Clause 15(3). Under subsections 15(3) and (4) the Treasury may remove from any report material,
	"which relates to the affairs of a particular person whose interests would, in the opinion of the Treasury, be seriously prejudiced by publication of the material; or [where] the disclosure of which would be incompatible with an international obligation of the United Kingdom".
	Amendment No. 92 makes it clear that the authority cannot be a person whose interests would be prejudiced by the publication of any material. Amendment No. 93 would require the Treasury to publish a statement if any material was removed from a report before publication, to the effect that,
	"material relating to a particular person has been removed",
	from the report. I beg to move.

Lord McIntosh of Haringey: The Treasury power to commission independent public interest inquiries into regulatory matters is an important new element of the accountability framework. For the first time it will ensure that there would be proper statutory backing for any future inquiries such as the Bingham Inquiry into the collapse of BCCI in 1991, or the inquiry by the Board of Banking Supervision into the failure of Barings in 1995.
	This is a very important step. The Bingham Inquiry was an important inquiry and produced an authoritative report. But it was conducted in the absence of any formal power, for example, to call witnesses. It is inherently unsatisfactory that such a vital inquiry should have to rely on witnesses coming forward on a voluntary basis.
	Clause 12 provides a new statutory power to set up an inquiry, and Clause 14 ensures that an inquiry can be conducted with the full range of powers to gather evidence of the High Court.
	I will deal with each of the amendments in turn. Amendment No. 87 is the trigger for the inquiry. It deletes the word "serious" from the provision in Clause 12 to allow the Treasury to arrange a public inquiry where there has been a serious regulatory failure. It would widen the circumstances in which the Treasury could arrange an inquiry to merely where there has been a regulatory failure, however small. This would confuse the purpose of providing this new power with other mechanisms under the Bill.
	We do not want inquiries of this kind to become a matter of routine. They can become very disruptive of the day-to-day working of the regulatory system and it would confuse the regulatory responsibility of the FSA if every other decision was liable to be the subject of a full-scale inquiry.
	The complaints investigator is there to help call the FSA to account for failures or lapses which do not have serious implications. It is therefore right that the Bill should contain explicit provision stating that the purpose of the power is to look into serious regulatory failures.
	There is nothing to be gained from removing the adjective; it would just cause unnecessary pressure to have a full independent inquiry into all sorts of regulatory decisions, which is what the Government are trying to avoid. The triggers have been deliberately set high because we do not want these inquiries to become commonplace.
	Amendments Nos. 90 and 91 would have the effect that the Treasury would be required to publish the entire report of an inquiry, subject to the required excisions under Clause 15(3). We do not think it would be right to remove the discretion of the government of the day to take a view on whether publication of the whole report was in the public interest. Of course we want to see as much of the report published as possible, subject to considerations of fairness, our international obligations and the wider public interest.
	It must be a decision for the government of the day. The report may well include sensitive material. Much of the Bingham report was not published. The previous government took the view that the public interest lay in publishing some but not all. People gave evidence to the Bingham inquiry in confidence, and publishing their evidence could have prejudiced future inquiries. We agree that that confidence should be respected.
	It is right for the Government to exercise judgment on where the public interest lies, in the light of the particular circumstances, and to be answerable to Parliament for that decision. If we were to make publication of the whole report mandatory, it would be less likely that this valuable power would be exercised in the circumstances that warranted it; so the lessons of a serious regulatory failure might not be fully or adequately learned.
	Amendment No. 92 would exclude the FSA from the protection against prejudice that is being given to other persons. Subsection (3), as currently drafted, restricts the discretion of the Treasury in that it expressly prevents publication of material that would be prejudicial to a particular person or which would be incompatible with an international obligation. This is an important restriction, given our desire to provide for fairness throughout this legislation.
	It is not clear why we should make a special case for the FSA if there was material published which might prejudice the ability of the FSA, or members of its staff, to defend themselves against charges brought in connection with events in this report. We must remember that the purpose of inquiry is to learn the lessons of regulatory failure, not to facilitate other legal actions. In particular, we would always expect the FSA to co-operate fully with an inquiry, but it would be less likely if the FSA was not afforded the same protection as other witnesses.
	Amendment No. 93 on disclosure of excisions would require the Treasury to make public material that is related to a particular person that has been removed by means of a statement. I understand the intention behind the amendment. In the interests of openness and transparency, we would expect to make it clear when parts of the report had been removed, but we cannot rule out circumstances where even this disclosure would be prejudicial or contrary to the wider public interest.
	These inquiries are not intended to become commonplace. They are to enable lessons to be learned from serious regulatory failures. As much as possible should be made public, but it should not be at the expense of basic principles of fairness, our wider international obligations or the public interest. These judgments must be taken by the government of the day, as they were taken in relation to the Bingham report. I hope that noble Lords will not press the amendment.

Lord Boardman: I regret that the Minister does not feel able to accept the amendment. The damaging aspect of publishing only part of a report is that it creates an atmosphere of great suspicion about the parts that are concealed. Very often, an amendment of this kind will mean that those who are supposed to be protected will face even greater exposure.
	I hope that the Minister will reflect again on that matter. People can be severely damaged by omission, far more than by a statement of the material facts.

Lord Kingsland: The most remarkable thing about the Minister's statement is that he succeeded in reading it out while maintaining a completely straight face. With the greatest possible respect to the Minister, his reply to the amendments is wholly inadequate. The noble Lord said that these inquiries were established and pursued in the public interest. Can it really be right that, at the end of this process, the Treasury can say that it is not in the public interest for a report produced in the public interest to be published? That seems to me to be "nonsense upon stilts", to quote a famous 19th century philosopher.
	I also wholly endorse the remarks made by my noble friend Lord Boardman. It was not just that the Minister said that it was wholly proper for the Treasury to allow only the partial publication of a report; if I heard the noble Lord correctly, he also went on to say that the Treasury was not obliged to say that it was only permitting partial publication. In that case, what is published would appear to the general public to be the whole story. That simply cannot be right.
	Moreover, your Lordships find that the authority is allowed to protect itself by not publishing certain passages in the report or not revealing the identity of certain of its employees, even though, in another part of the Bill, the Minister seeks total statutory immunity for the FSA and its employees. I hope that the noble Lord will forgive me if I find his answer wholly unsatisfactory. It is not a matter that I intend to press on behalf of the Opposition at the moment, but the noble Lord can be assured that we shall return to it on Report. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Lord McIntosh of Haringey: moved Amendment No. 88:
	Page 6, line 11, leave out from ("persons") to end of line 16 and insert ("--
	(a) who are consumers for the purposes of section 129; or
	(b) who, in relation to regulated activities carried on otherwise than by authorised persons, would be consumers for those purposes if the activities were carried on by authorised persons.").
	On Question, amendment agreed to.
	Clause 12, as amended, agreed to.
	Clause 13 agreed to.
	Clause 14 [Powers of appointed person and procedure]:

Lord McIntosh of Haringey: moved Amendment No. 89:
	Page 7, line 8, leave out subsection (4).

Lord McIntosh of Haringey: In moving this amendment, I shall speak also to Amendments Nos. 226, 234, 236, 237, 244, 245, 252, 258 and 277, as well as addressing the question as to whether Clause 401 (privileged communications) should stand part of the Bill. These amendments bring the definition of "legal professional privilege" in the Bill into line with the Police and Criminal Evidence Act 1984. At the same time they provide a consolidation, in a single clause, of existing provisions in the Bill that prevent powers being used to require a person to disclose or permit the inspection of material that is subject to legal professional privilege.
	The new clause will ensure that no powers under the Bill can be used to require disclosure or access to privileged material. Adopting the PACE definition also makes it clear that privilege attaches not just to legal advice but also to documents and other material enclosed with legal advice where those were brought into existence for the purposes of legal proceedings and are in the hands of someone who is entitled to possession of them. I beg to move.

On Question, amendment agreed to.
	Clause 14, as amended, agreed to.
	Clause 15 [Conclusion of inquiry]:
	[Amendments Nos. 90 to 93 not moved.]
	Clause 15 agreed to.
	Clauses 16 to 18 agreed to.
	Clause 19 [Restrictions on financial promotion]:

Lord Kingsland: had given notice of his intention to move Amendment No. 93A:
	Page 8, leave out line 24 and insert--
	("(a) an invitation to engage in investment activity; or
	(b) any other information with the purpose of inducing another person to engage in investment activity")

Lord Kingsland: I must apologise to the Committee for having introduced into today's proceedings some manuscript amendments which I trust noble Lords have to hand. In any event, I understand that under the rules of this House I am obliged to read out these amendments verbatim. Those noble Lords who do not have the amendments before them therefore will not be inconvenienced or prejudiced in any way. I shall not move Amendment No. 93A.

[Amendment No. 93A not moved.]
	Clause 19 [Restrictions on financial promotion]:

Lord Kingsland: moved Amendment No. 94:
	Page 8, line 24, leave out ("or inducement to engage in investment activity") and insert ("to engage in investment activity or information which is intended or might reasonably be presumed to be intended to induce any person to do so").

Lord Kingsland: This amendment seeks to excise the expression,
	"or inducement to engage in investment activity",
	and insert the expression,
	"to engage in investment activity or information which is intended or might reasonably be presumed to be intended to induce any person to do so".
	Clause 19 prohibits companies which are not authorised under the Act from issuing communications which constitute invitations or inducements. As the Committee is undoubtedly aware, the trouble with inducements is that they look only to the effect on the recipient of the communication. Thus good news about a company may persuade someone to invest even if there was no intention to induce that person to do so. The term "inducement" is unsatisfactory since a communication could operate as an inducement whether or not the person making the communication intended it to do so. The term "inducement", in short, would reinstate much of the confusion which has surrounded the 1986 Act's definition of "investment advertisement", but in a wider sphere, given that the new law will apply to a much wider group of communications.
	I shall not move or speak to Amendment No. 94A. I now turn to Amendment No. 95, which states,
	"Page 8, line 30, leave out from ('(1)') to ('in') in line 31 and insert ('does not apply unless the communication is intended or might reasonably be presumed to be intended to be acted on by a person')",
	in the United Kingdom. Clause 19(3) extends the prohibition to communications from outside the United Kingdom if they are capable of having an effect in the United Kingdom. This is far too wide, as it covers, for example, any communication relating to shares registered or quoted in the United Kingdom. In addition, Clause 19(3) does not reflect either host or home country control, which is all the Treasury, as I understand it, has said that it wanted to achieve.
	The Government have tabled an amendment to this clause which would introduce a new subsection (5A). The amendment is helpful in that it enables the Treasury to switch to a country of origin approach, in circumstances such as the proposed e-commerce directive, where the Government consider that another state's requirements provide sufficient protection to United Kingdom customers both to allow mutual recognition of home state control and to disapply control over promotions originating from that state, even though they may be capable of having effect in, or be directed at, the United Kingdom.
	Nevertheless the application of the general prohibition to both outgoing and incoming promotions still exposes United Kingdom firms to the possibility of overlapping and potentially contradictory requirements in respect of countries where a subsection (5A) order does not apply. The Government have partially recognised this problem by the provision in Article 15 of the draft exemptions order that "foreign source" communications are saved from being illegal--because they are capable of having an effect in the UK--if they are not directed at the UK.
	However, this exemption applies only to investment business activity and not to foreign-source deposit or insurance advertisements. The "capable of having an effect" wording is widely regarded as unclear and could cover all foreign banks and insurance companies using the Internet since, in theory at least, someone in the UK could act on the information in those websites. It is in order to avoid uncertainty and the possibility that promotions might need to comply with more than one regime that Amendment No. 95 has been tabled.
	I now turn to manuscript Amendments Nos. 96A to 96E. Amendment No. 96A reads:
	"Page 9, line 1, leave out ("an") and insert ("a specified")".
	Amendment No. 96B reads:
	ldquo;Page 9, line 2, leave out ("an") and insert ("a specified")".
	Amendment No. 96C reads:
	"Page 9, line 8, after ("of") insert ("subsection (6)(b) and")".
	Amendment No. 96D reads:
	"Page 9, line 9, leave out ("that subsection") and insert ("those subsections")".
	Amendment No. 96E reads:
	"Page 9, line 11, after ("by") insert "subsection (6)(b) or")".
	The purpose of these amendments is as follows. Under Clause 19(6)(b), "Engaging in investment activity" is defined as including,
	"exercising any rights conferred by an investment to acquire, dispose of, underwrite or convert an investment".
	Under Clause 19(11), "Investment" is defined to include "any asset, right or interest". This could clearly extend to assets, rights and interests which are beyond the field of financial services. The legislation should therefore contain a power for the Treasury to limit its application by order.
	These are manuscript amendments. The next one is Amendment No. 116A. I am not sure whether I should deal with the remaining manuscript amendments in this group or wait until we come to deal with Clause 28. I shall not deal with them now. I beg to move Amendment No. 94. I have spoken to the other amendments in the group.

Lord McIntosh of Haringey: I shall do my best to keep up. The noble Lord has introduced manuscript amendments and then not moved them; he has brought Amendment No. 95 from a different group into this one and I am struggling to keep the argument together. Perhaps I may be excused from giving a general introduction on financial promotion and, with some diffidence, speak to Amendments Nos. 93A and 94, even though Amendment No. 93A has not been moved. They concern alternative approaches and I have to discuss them both in order to enable the Committee to understand them.

Lord Kingsland: I thank the Minister for giving way so generously. I can only say, on this occasion, mea maxima culpa.

Lord McIntosh of Haringey: We all do our best. No doubt I shall have to do the same at some stage.
	Opposition Amendments Nos. 93A and 94 propose two alternative strategies to Clause 19 on financial promotion. Amendment No. 93A proposes to limit the prohibition to,
	"an invitation to engage in investment activity; or ... any other information with the purpose of inducing another person to engage in investment activity".
	Amendment No. 94 proposes to limit the prohibition to invitations "to engage in investment activity", or to,
	"information which is intended or might reasonably be presumed to be intended to induce any person to do so".
	I thought that Amendment No. 93A would be the preferred approach, but I was wrong.
	The Government have reiterated the policy behind Clause 19(1) on several occasions. In their consultation paper, Financial Promotion--Second Consultation Document, issued last October, they indicated that the prohibition now applies only to those communications containing a degree of "incitement"--invitation, inducement, incitement--and not to communications comprising purely factual information where the facts are presented in such a way that they do not amount to an invitation or inducement. The Economic Secretary said in Committee in another place that Clause 19 is intended to catch "promotional" communications, which is the common-sense way in which one would understand the clause.
	However, we should appreciate a further opportunity to review whether the policy behind the clause could be clarified. We may possibly bring forward amendments at Report stage. The provision in the Bill as drafted is the best way of tackling these issues; however, we shall take the noble Lord's points away in a constructive spirit, perhaps talk to him between now and Report, and see what there is of value in his amendments. I am by no means saying that there is nothing of value in what is proposed.
	Manuscript Amendments Nos. 96A to 96E relate to subsection (6)(b) and related subsections in Clause 19, as well as Clause 98, limiting engagement in investment activity in Clause 19(1) to activities in relation to investments which are specified in secondary legislation.
	Amendment No. 116A, which amends Clause 28, is consequential upon this amendment. I am sorry that I said that the noble Lord should not speak to it. If I thank him for the amendments and agree to consider them, perhaps he will not feel too bad about my telling him not to debate them now.
	I do not know whether the noble Lord has spoken to Amendment No. 104. I understood that it was included in this grouping as printed. I wonder whether I may respond--

Lord Kingsland: I was about to suggest that if the noble Lord responds to the amendment before I speak to it, perhaps I shall not need to speak to it!

Lord McIntosh of Haringey: Yes, all right. The Opposition also propose to add to Clause 23 a further subsection. Under Clause 23 as amended, subsection (1) setting out the criminal offence of contravention of Clause 19(1) would not apply to,
	"an oral communication which does not constitute an invitation to engage in investment activity",
	although contracts made as a result of such promotion would presumably remain unenforceable. I am afraid that we cannot accept this amendment. The impact would be to create a two-tier regime with regard to penalties for breach of Clause 19 whereby some communications which breach the prohibition are subject to criminal sanctions while others are exempt.
	It is not just invitations that can lead to people entering into investment agreements but material that does not constitute an invitation but nevertheless contains a promotional element. The impact of the promotion will be the same if there is something less than an invitation but if it nevertheless contains a promotional element. In any event, an exclusion of the kind proposed would lead to arguments as to whether what had actually been said constituted an invitation. That is the kind of uncertainty that we want to avoid.
	We have already proposed, in our second consultation paper in October, that solicited real time communications, including oral communications which are not part of a co-ordinated promotional strategy should benefit from an exemption. However, we remain convinced that unsolicited real time communications of a certain character should be subject to controls and restrictions. It is important that we adopt a stronger line on unsolicited calls, given the risks to which they expose consumers.
	In any event, it is in the interests of consumers that a uniform approach be taken on the face of the Bill with regard to all communications, oral or otherwise, that amount to an invitation or inducement to engage in investment activity. The debate on the draft financial promotions exemption order which will take place after Royal Assent will be the appropriate point at which to discuss which real time communications should be classified as exempt from the prohibition. In any event, Clause 19 prohibition can have no effect and cannot be brought into force until the necessary subordinate legislation has been made. So in regard to this as opposed to the other amendments, I can only say that we cannot accept the amendment and I hope that the noble Lord will withdraw it.
	The noble Lord went on to speak to Amendment No. 95. That is grouped with Amendment No. 94A, which the noble Lord does not intend to move, and my Amendment No. 96. Amendment No. 95 would amend subsection (3) of Clause 19 so that subsection (1), which deals with communications originating outside the United Kingdom, applies only to communications which are intended or might reasonably be presumed to be intended to be acted on by a person in the United Kingdom. That would be similar in effect to Amendment No. 94. It would apply the limitation sought in that amendment, to limit the prohibition to invitations to engage in investment activity or information which is intended or might reasonably be presumed to be intended to be acted on by a person, to subsection (3), which establishes the territorial dimension of the financial promotion prohibition. The amendment is certainly worthy of further consideration in the light of the discussion we have been having. I hope that the noble Lord will not move it on the basis that we will reconsider the issues involved.
	Perhaps the noble Lord will allow me to refer to my Amendment No. 96, which is grouped with Amendment No. 95. The purpose of the amendment is to clarify that the Treasury can adjust the scope of the Bill's financial promotion regime to take full account of international and technological developments. Clause 19 prohibits financial promotions unless the promoter is authorised by the FSA or the promotion is approved by a person who is authorised. Subsection (5) of Clause 19 allows the Treasury by order to specify circumstances in which this restriction does not apply. The amendment makes it clear that the circumstances that can be specified under subsection (5) extend to the circumstances for which subsection (3) expressly makes provision. Subsection (3) prohibits communications originating outside the United Kingdom if the communication is capable of having an effect in the United Kingdom. In other words, the amendment makes it clear that an exemption can be made for a communication which originates from outside the United Kingdom even if it is capable of having an effect here. Paragraphs (b) to (d) of the amendment deal expressly with the possibility of exemption for communications originating in specific countries, or in specific groups of countries, such as EU member states, and would allow all communications originating overseas to be exempted if that became appropriate.
	The exemption for groups of countries would allow the UK to move to a full home state regime if and when EU legislation to that effect comes into force or, in an appropriate case, before any binding obligation. Subsection (5B) provides that the Treasury may at some point in the future repeal subsection (3) of Clause 19.
	I know that that sounds complicated but the principle behind the provision is that we have to adopt a host state regime at the present time. It is the intention of the European Union to move towards a home state regime. We do not wish to leave anyone unprotected in the interval. But until a full home state regime exists in which all member states of the European Union have a regulatory system that is satisfactory for the purpose, we will operate, so to speak, a hybrid of host state and home state regimes which will be fail-safe and will protect the users of financial services. I realise that this is not an easy concept but I hope noble Lords will accept that the thinking behind it is reasonable.

Lord Kingsland: I realise that one swallow does not make a summer, but I am rather heartened by most of the noble Lord's observations. I shall reflect on what he said about Amendment No. 104. If the Minister engages in a spot of archaeological reconstruction in respect of the speech with which I introduced these amendments, he will note that I did in fact speak to Amendment No. 95 and indeed made some fairly detailed observations on his Amendment No. 96. I hope that he will be able to take those comments into account when he considers these matters later. In the meantime, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.
	[Amendments Nos. 94A and 95 not moved.]

Lord McIntosh of Haringey: moved Amendment No. 96:
	Page 8, line 38, at end insert--
	("(5A) An order under subsection (5) may, in particular, provide that subsection (1) does not apply in relation to communications--
	(a) of a specified description;
	(b) originating in a specified country or territory outside the United Kingdom;
	(c) originating in a country or territory which falls within a specified description of country or territory outside the United Kingdom; or
	(d) originating outside the United Kingdom.
	(5B) The Treasury may by order repeal subsection (3).").
	On Question, amendment agreed to.
	[Amendments Nos. 96A to 96E not moved.]
	Clause 19, as amended, agreed to.
	Clause 20 [The classes of activity and categories of investment]:

Lord Lyell: I must advise the Committee that if Amendment No. 97 is agreed to I cannot call Amendment No. 98.

Lord Sharman: moved Amendment No. 97:
	Page 9, line 16, leave out subsection (1) and insert--
	("(1) An activity is a regulated activity for the purposes of this Act if it is--
	(a) an activity of a specified kind which is carried on by business and--
	(i) relates to an investment of a specified kind; or
	(ii) in the case of an activity of a kind which is also specified for the purposes of this paragraph, is carried on in relation to property of any kind;
	(b) an activity which is carried on by business and relates to loans secured on land or any other property.").

Lord Sharman: In rising to move Amendment No. 97 I should like to speak also to Amendments Nos. 100 to 102. This group of amendments deals with mortgages. As the Committee will be aware, this matter was added at a rather late stage in the passage of the Bill through another place. I am somewhat hopeful that at this stage in the proceedings the recently found flexibility of "Dr No" on the Government Front Bench may indicate some willingness to consider these amendments.
	Amendment No. 97 seeks to extend the regulatory regime beyond coverage of the providers of mortgages and products related to them to those who intermediate in those transactions. The Committee will be aware that often a mortgage is the largest single transaction ever undertaken by a consumer. It is important that the Bill should cover those who provide advice on mortgages and intermediate in that regard.
	Amendment No. 100 seeks to help the Minister to find a better definition of "mortgage". At the moment the Bill defines a mortgage as a loan that is secured on land. Loans, commonly referred to as mortgages, may be secured on many types of physical property; for example, leaseholds, boats, aircraft and even caravans. Currently, mortgage lending leans heavily on what is called churn and involves both second mortgages and the provision of finance for other physical property. Frequently, a mortgage that is secured on a boat may be two or three times the size of that secured on the average house. These definitions, which I hope are well drafted, certainly have merit. I beg to move.

Baroness Turner of Camden: I support the amendment. My Amendment No. 101, which is included in this group, was tabled at the instance of the National Consumer Council. That body wrote to me to express disappointment that the Government had not chosen to include full regulation of mortgages within the authority's remit. As has just been said, a mortgage is probably the largest investment that the average person makes in a lifetime. The only other investment of similar size is that related to pension provision. These are major decisions which matter awfully to most people. I understand that regulation is partially extended to this area. I should like to hear from the Minister precisely what that means because the amendments before the Committee this evening seek to provide full regulation of mortgages by the FSA.

Lord Jenkin of Roding: I speak from my former experience as chairman of a life insurance company. The life insurance industry found itself increasingly affected and disadvantaged by the fact that almost identical products were able to be sold under the guise of mortgages which were not subject to the full regulatory impact of the financial services legislation. They were in competition with similar products sold by life insurance companies. On a number of occasions and on a number of different platforms I argued that that was a very uneven playing field.
	Therefore when the Government decided finally that mortgages should come within the scope of the Bill, I was pleased. My reaction at the time was to say, "Not before time". However, until the National Consumer Council and others reacted with disappointment, I had not realised that the people who sell them--brokers and others throughout the country--are not to be subject to the controls provided by the Bill. I find that quite extraordinary. How one can divide the market in mortgages between the providers-- building societies, banks and others which advance money on the security of property (and I accept the point that the noble Lord, Lord Sharman, made; it is not just land)--without at the same time bringing within the control the people who deal face to face with the public who have to borrow in order to finance their purchase leaves me deeply puzzled. One has half the control. But consumers may not be particularly sophisticated and may have difficulty in understanding some of the projects they are being invited to buy. As we discussed earlier, we seek to protect them and to make sure, for instance, that there is a proper fact find. Is a mortgage backed by an endowment policy right for them; or should it be an interest-only mortgage? Those are important questions almost wholly decided between the customer and the mortgage broker.
	As I understand the changes that the Government have made to the Bill, the mortgage broker is not within that control. The Government have not taken even two steps forward but only half a step forward and one step back in bringing in the building societies but not the brokers. I join with the noble Baroness, Lady Turner of Camden, in asking Ministers to justify what seems at first sight to be a somewhat extraordinary division.

Lord Burns: I support the amendment of the noble Baroness, Lady Turner of Camden. When the issue was discussed in the Joint Committee a variety of views was expressed. However, the majority decided in favour of including mortgage advice. We recognised that a timetable for implementation would be required. The costs could be high. It might be a problem for the FSA to implement it quickly. Nevertheless, there was concern for a number of reasons: the importance of the transaction; and the growing complexity of choice available, in particular between fixed and variable rate mortgages. There is a wide range of discounts on offer; and there is the question of penalties on repayment.
	I understand why the Government have opted for a balance between having the mortgage providers fall within the regulations and trying to keep mortgage advice out. The majority of the problems which arise are concerned with the mortgage providers and the hope is that one can deal with many of them by setting out in more detail the facts and the commitment that the customer is making.
	However, we shall be faced with enormous problems in the future. When people believe that they have been given bad advice there will be a great debate as to where the fault lies. To what extent does it lie with the providers and to what extent does it lie with those who gave advice? Mortgages are a large financial product and play a big part in people's lives. To leave people in doubt as to which part of the process falls within the regulations and which part does not can only cause great confusion.
	I understand the problems of cost and the number of people who will be brought within the framework of the regulations. I can also understand why there is no hurry to act. However, I should be greatly surprised if the balance between what is in and what is out were sustainable. The time will come when everything must be included.
	I had hoped that we could move forward with a general expression of intent and then worry about the timetable. The Government have chosen not to do that and I, like the noble Lord, Lord Jenkin, am sorry about that.

Lord Joffe: I, too, support the amendment. I share the puzzlement of the noble Lord, Lord Jenkin, at the rationale behind the Government's proposal to introduce the regulation of mortgages on only a piecemeal basis. In order to recognise the dangers of the proposal, it is helpful to explore what happens at the point of sale. The borrower seeking a mortgage is often engaging in the largest and most complex financial transaction of his life. He often has no experience of such transactions. And even if some of the options are explained to him, there are, as the Treasury's press release on mortgage regulation points out, some 4,000 to 5,000 different mortgage deals to choose from.
	Perplexed by all the options--and often they are not explained at all--the borrower normally turns to his friendly mortgage broker, who is trying to sell him a mortgage, asks for his advice and then follows it. If that advice is inappropriate, it may be many years before the borrower realises it. And when he does, under the Government's proposals he will have no redress.
	When I was chair of the complaints committee of LAUTRO, the regulator that preceded the Personal Investment Authority, time and again we were prevented from redressing the obvious mis-selling of life insurance products for the very reason that mortgage advice was not regulated. The FSA ombudsman will find himself in an identical position. As the noble Lord, Lord Jenkin, said, it is difficult to understand the reasoning behind the Government's decision to exclude mortgage advice. On the one hand, sales people who sell life insurance products, which are often simpler than the current range of mortgage products and of a relatively lower value, are regulated while mortgage brokers, who sell the complex and often high-value mortgages, are not. It is difficult to understand the rationale behind the approach.
	Experience of mis-selling of life insurance policies has demonstrated how difficult and costly it is to deal with the consequences of mis-selling. The aim of regulation must surely be to prevent poor advice being given in the first place and the proposed amendment will help to achieve that.

Lord McIntosh of Haringey: It may be helpful if I begin by explaining briefly the context in which these amendments are being debated. The announcement by the Government about the inclusion of mortgages in the scope of the Bill did not require an amendment to the Bill. That is the way in which Clause 20 and Schedule 2 are constructed.
	Under Clause 20, the scope of regulation is to be set out in secondary legislation. Schedule 2 contains an indicative list of the core activities and investments which might reasonably be regulated by a financial service regulator. However, the list is not exhaustive and Schedule 2 does not limit the Treasury's power to make an order under Clause 20(1). Clause 36 gives the Treasury the power to make orders which exempt specific natural or legal persons or classes of person from the general prohibition under Part II and, therefore, from the need to be authorised by the FSA.
	With that, I move to the substantive issue which, I accept, is more important than the amendment because an amendment would not be necessary to give effect to what Members of the Committee want. I should stress that although the general scope of regulated activities is indicated in Schedule 2, the scope of regulation will be marked out in the Regulated Activities Order, where regulatory issues can be handled more flexibly. The first order made in exercise of this power and all subsequent orders which extend the scope of regulation will be subject to an affirmative resolution procedure, giving both Houses the opportunity to voice their views on regulatory issues.
	I turn to the issue of whether and how much mortgages should be regulated. The Government plan to cover most residential mortgages as we are determined that lenders should not be able to take advantage of mortgage borrowers at a time when they may be vulnerable because they are focusing on a home purchase. I go along with what every Member of the Committee has said about the importance of a decision of this kind in people's lives.
	As for "any other property", referred to in Amendment No. 97, the Government are concerned about protecting people's homes. On the whole, caravans and yachts do not fall into this category; nor does any other non-residential property. We recognise that mortgage borrowers need better information. Regulation through the FSA will ensure that they receive it in a form which will readily enable comparisons to be made in order to help people to decide what suits them. Therefore, so far as concerns Amendment No. 97, I hope that that meets noble Lords' concerns and that they will be able to withdraw their amendment.
	I turn to Amendment No. 101 in the name of my noble friend Lady Turner of Camden. The Treasury consulted last year on whether mortgage advice should be regulated. Evidence from the consultation showed that the main area of preventable consumer detriment was poor quality or misleading information which resulted in consumers buying an inappropriate mortgage product. In other words, consumers wanted clear, comprehensive and reliable information.
	The Treasury received little evidence of specific cases where consumers were receiving bad or biased advice. When that was mentioned, it was in the context of selling commission-based products, such as endowment policies. I hope that it is clear, because it was not clear to me at the beginning, that commission-based products, such as endowment policies, are already FSA-regulated and did not need to be included in the Bill under the change which was made in relation to mortgage regulation.
	On that basis, most problems in the mortgage industry could be dealt with by a combination of a disclosure regime and CAT standards, together with action taken by the DTI banning the tying-in of insurance policies and standardising annual percentage rates. Therefore, there is no need to regulate advice.
	I turn now to Amendment No. 102. I have already indicated my reasons for resisting the amendments to Clause 20. I hope that this amendment may be withdrawn, too. It is not that we do not want to cover mortgages; we shall be covering most residential mortgages, first legal charges, home income plans and equity release schemes on property occupied by the borrower. The Bill will cover mortgage lending on property to be occupied by the borrower or the family.
	It will not cover mortgage brokers, who will not need to be specifically authorised unless they also carry out investment business such as advising on endowment policies. We certainly shall not cover second charges on homes; for example, for loans on replacement windows or kitchens and so on. That is partly because most transactions of that nature are covered by the below £25,000 limit contained in the Consumer Credit Act. Therefore, they are covered by the CCA.
	I hope that I have persuaded Members of the Committee that we have covered the most important elements of mortgage regulation at a price which is acceptable and at an addition to the FSA's resources and responsibilities which is also acceptable.

Lord Sharman: Sadly, that was a false dawn. I am in a state of total confusion. I really do not understand what the Minister has been saying to us. I wish to reserve my position until I have had an opportunity to read in detail in Hansard what he said.
	I make two observations which struck me as he was making his remarks. Clearly, the noble Lord does not consider that a caravan can be a home, which it is to many families in this country. The same can be said about a boat. Both may have valid legal mortgages on them and, for the life of me, I cannot understand why they should not be considered in the same manner.
	However, I shall look in some detail at what the Minister said before returning to this matter on Report. In the meantime, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.
	[Amendment No. 98 not moved.]

Lord Lipsey: moved Amendment No. 99:
	Page 9, line 25, at end insert--
	("( ) The Treasury shall within 28 days of the passing of this Act make provision under subsection (1) in respect of buying, selling, subscribing for, carrying out or underwriting contracts of insurance against the provision of long-term care or offering to do so, either as a principal or as an agent.").

Lord Lipsey: First, I thank noble Lords on all sides of the Chamber who have been kind enough to support this amendment. In recent weeks, I felt rather like the Ancient Mariner as I prowled the Corridors of this House, stopping one in three and telling of the woes which will arise if this amendment, or at least its substance, is not accepted by the Government. However, I have been received with nothing but patience, understanding and a great measure of support. I extend that thanks to my own Front Bench and to the Minister, in particular, who has been endlessly generous with his time and patience in discussing this matter.
	When I spoke on this matter on Second Reading, I pointed out that there really was a very wide consensus that long-term care products should be brought into regulation in view of their nature and the vulnerability of those to whom they are sold. That extended to the PIA, the new FSA, both the majority and minority members of the Royal Commission on Long Term Care and, perhaps most significantly, to the Joint Committee chaired with such distinction by the noble Lord, Lord Burns.
	In the past few weeks, we have been reminded of that by some of the letters that we have received from outside. Many Members of the Committee will have received a letter from Age Concern. I see the noble Baroness, Lady Greengross, in her place. Age Concern states that it believes that it is,
	"vital that people are given appropriate financial advice from a competent professional and hence we believe these products ought to come under the rules of the Financial Services Authority".
	I have received a letter from the Continuing Care Conference which is an umbrella organisation, a very fine organisation, embracing all the interests from producers to those who are cared for. It too says that it believes that,
	"regulation and consumer protection is essential",
	since it says that,
	"by their very nature, they involve large sums of money and entail a long-term relationship with the customer".
	It is striking that that is also the view of the industry. I have received a briefing from the Association of British Insurers which says that it is supportive of regulation. Even the industry wants to be regulated.
	Today, the fourth estate has rowed in. In its leader this morning, the Guardian stated that,
	"peers should step in where pusillanimous ministers fear to tread".
	Needless to say, I should resist absolutely any suggestion that anyone on our Front Bench has any pusillanimity of any kind whatever. But I agree with the broad thrust of the Guardian's leading article. So it seems that everyone is out of step except our Treasury. That is a puzzle, particularly to people like me who believe that the Treasury does little wrong. The problem is that the Treasury has not been terribly good at communicating its problem. It has taken more positions on the issue than appear in the Kama Sutra. I have argued through each of them, only to find that behind it lies yet another position. I hope that we are now getting somewhere near the top of the mountain and that we shall see what it is really on about.
	In the course of saying that, I shall deal with the argument eloquently put by the Minister at Second Reading where he hinted that CAT standards might be enough to control the product. But they are not enough in this area. I take the example of a lady of 90 who has no dependants, no heirs; no one to whom she wants to leave her money. She is going into a home. A salesman comes up to her and says, "Listen dear, unless you take out my insurance policy, you will be on the streets". He gives her his insurance policy. That policy may be absolutely perfect. It may meet CAT standards in every regard, but she does not need it, because under the existing arrangements, even before the Royal Commission's report is implemented, as soon as her assets go down to a certain level, she will be paid for by the state. She does not need the product, although it is an excellent product. What is needed is a salesman who is regulated, so that he cannot say that to the old lady, at least not if he wants to be reasonably sure of keeping his job.
	As the debate went on, however, we found a different argument coming forth from the Treasury; the argument that we are hearing. When I was on various broadcasts the other week debating the matter, I was told that a Treasury press spokesman had said that the idea was premature. What a great, "Sir Humphrey" word "premature" is. "Premature", when 30,000 policies have already been sold. "Premature", when it is 12 months since the Royal Commission reported and 10 months since the Burns committee reported. "Premature", when the Government have only just got around to setting up a committee to consider the issue, which has met--I asked the other day--precisely once. "Premature"--this is the most important point, because it matters to consumers--because, by this summer, the Government have promised to give their response to the Royal Commission and to tell us what is to happen. When that response comes--the Royal Commission majority and minority reports both found a role for long-term care insurance--many people will realise for the first time that, contrary to their present expectations, the state will not fund all their care needs for them and, if they want to leave legacies to their children or to keep their money, they must insure for it.
	There is an issue of timing here. If the matter goes on being "premature" for too long, we shall find that we are just getting out to look at the bolt on the stable door while in the meantime the horse is galloping off, four fields away. It will then be too late to deal with the matter. It is not premature; it is overdue.
	From what I am saying, it will be clear to the Committee that I believe that the matter should have been dealt with before now. Having said that, we are where we are. I accept that there are certain hoops which must be gone through before regulation may be put in place. For example, it is clearly right in terms of general government policy that a proper regulatory impact analysis should be carried out before the form of regulation is finalised. Equally, it is clear also that the matter is urgent. As the time for the Government's answer to the Royal Commission looms closer, it is becoming more urgent.
	Having spoken to many noble Lords about the matter, I do not believe that the House will ever forgive itself if it allows the legislation, which gives it a grip on the issue, to go through unless and until it is satisfied that the Government have seized the point and are moving to action on it. I look with my customary optimism--perhaps with a little more than my customary optimism--to my noble friend the Minister for comfort. By the time we reach Report stage, I shall be looking for more than comfort. I shall be looking for commitment. I do not believe that we should let the Bill pass unless we are reasonably assured by Ministers that the interests of such a vulnerable group of consumers will really be protected.

Lord Burns: I too want to support the amendment. I agree with the noble Lord, Lord Lipsey. It is a puzzle that we are debating this matter. Just over a year ago, on, I believe, 16th March--I stress that date--in evidence to the Joint Committee, Howard Davies put the case for the regulation of long-term care better than I could. He took the committee through the methodology he wanted to deploy in looking at the new product area. He argued:
	"I would say that long-term care insurance probably also scores quite highly ... I suspect that if you ran a complete cost-benefit analysis on that you would find that scoring quite highly".
	Having listened to the arguments, the Joint Committee also concluded that long-term care should be included.
	In response to the report of the Joint Committee, the Government offered some optimism. They said that they also appreciated the thinking behind the recommendation that long-term care insurance be brought within the remit of the FSA. That has been considered in the context of the Government's response to the recent report of the Royal Commission on long-term care which reached a similar conclusion.
	That is good. But almost nothing has happened. As the noble Lord, Lord Lipsey, pointed out, we have had radio silence. That has caused a number of noble Lords to wonder what is going on. Those of us who know the Treasury well know that it can work fast when it needs to. We also know that sometimes it does not necessarily want to move too quickly.
	I would like to believe that it is merely the pressure of work and the huge effort that has gone into this Bill that explains the silence. I hope that there is no joined-up decision-making problem with other departments. The best gloss I can put on it is that a decision in principle has been taken but that it will take time to complete the work.
	It would be sad if the Government decided on the basis of all the talk about this over-mighty and unaccountable organisation that somehow or other we should draw a line in the sand on this point and that these products should be left out of the ambit of the FSA. That would be a bad mistake. There may be worries that if we have regulation here it may stifle growth in the market. It is equally possible to argue that if we had regulation it would make the market grow faster than otherwise because of the extra security that it would give to people.
	The Minister said in relation to the previous amendment that in practice this provision does not need to be in the Bill. I believe the scope is already there. However, several noble Lords want some reassurance, not only that it is possible, but also that there is a good chance that it will happen. I believe that we need a decision in principle about this matter, even if all the detail cannot be announced now. At a minimum, we require a strong indication that the Government are minded to include long-term care within the scope of the Bill.
	I do not believe that there is any reason to make a fuss over this issue. I hope that the Minister can give us the comfort that we need to go quietly because that is what we want to do. But it is important to say that to some of us that it is beginning to look a little too difficult.

Lord Phillips of Sudbury: I was happy to add my name to this amendment. Most of what needs to be said has been said, but I want to make a few points. First, if this Bill has any popular support, I suspect that in this area it will have more support than in any other for the simple reason that it affects a great and growing number of people. Recently, in these times of difficulties for the National Health Service, we have read of the growth in private health generally. That is true too of the subject about which we are talking. Secondly, it is a matter that affects old people for a long time. They will enter into such a contract for life and it will take a sizeable part of their assets if not, in extreme cases, all of them.
	Thirdly, it is clear to me that these products are very complex and sophisticated. The numbers and types of product are legion and none is simple. One has to add to that the personal complications that can beset old people, in particular lonely old people, when trying to decide what is best for them. They need to embark on what one might in effect call a series of gambles on the future. How is their health going to fare? What demands will be put on their assets? What will those assets amount to and what will their families need of them? This is a difficult set of issues for people to face, both personally and legally.
	Finally, I turn to a point that is most important to me: the very people who need to confront these issues are those who have reached a stage in their lives when they are least capable of dealing with them. One does not need to conjure up black tales of wicked salesmen. Far more often it is simply the case of an old person pretending to understand that which he or she does not understand and failing to put those questions which in the prime of life he or she would have leapt to ask. Old people are highly suggestible and vulnerable.
	I am absolutely convinced that if there is only one amendment that deserves to be accepted without demur by Her Majesty's Government, it is this one or something very like it.

Lord Grabiner: Perhaps I may say that my noble friend Lord Lipsey is to be complimented on his persistence in this matter. This amendment identifies a very vulnerable group in society. To omit regulation in relation to this group would send out all the wrong signals. I do not believe that it is an exaggeration to say that these are potentially shark-infested waters, but with regulation it is probable that good competition will emerge in the market-place for this kind of business.
	Finally, I should like to say that I am not aware of any argument of substance against the amendment.

Baroness Greengross: I rise briefly strongly to support this amendment. The noble Lord, Lord Phillips, has already told the Committee how complex these products are, as is the whole market. People need to have confidence in it and to be given a feeling of security. For example, for those purchasing an immediate care plan dealing with a situation of personal crisis, it is of particular importance that this area is regulated.
	Disputes are another reason for providing good regulation. Disputes that may arise at the time of a claim need a form of independent complaints procedure. The voluntary jurisdiction by the PIA ombudsman is not sufficient.
	Finally, I should like to mention training and competence. A person selling this type of product needs a great deal of knowledge of the area. That person needs to be able to explain to the purchaser the interaction between the long-term care insurance product and the state support system. It could be very damaging to some people if they purchased such a scheme. However, in order to explain it, a salesman does need to understand it thoroughly because it is not an easy area.
	Furthermore, when selling these products, up-to-date advice needs to be given, balancing the benefits of the different options that are available. Also, a good knowledge of the variations in local authorities' procedures, what they make available, their rules and practices is also necessary. A new classification in training is desperately needed. For those reasons, I strongly support this amendment.

Lord Jenkin of Roding: I agree with virtually everything that has been said on this amendment. I wish to add two points. The first is that this is a market which, despite the figure stated by the noble Lord, Lord Lipsey, of 30,000 policies--that surprises me but of course I accept his word--is still in embryo. The products are extremely expensive. I made a few inquiries a couple of years ago to see whether this was perhaps a way of providing for myself and my wife, but was put off in the end because it was an extremely expensive option.
	The second difficulty, which I am sure the noble Baroness, Lady Greengross, has come across, is the test of eligibility when one comes to claim. A year or two ago I took part in a series of discussions initiated by the Medical Research Council--by Professor George Radda--and addressed to the Association of British Insurers and particularly those engaged in underwriting. The MRC wanted to find out if there was a need for research to establish more appropriate tests to find out whether or not an individual would qualify under a long-term care policy. Surprising though it may seem, the tests--certainly the ones I saw--were still those used in World War I in relation to military pensions; that is, the simplest tests as to whether or not a person could dress themselves, feed themselves, look after themselves and so forth. But medical science has advanced a long way from that. As the MRC said, there should be more effective and sophisticated ways of establishing a claim.
	This is a market which is developing quite fast. I lost touch with the discussions taking place with the MRC. I hope that they are continuing because they seemed to me to be important. In the circumstances of expensive policies in a branch of insurance which is still developing and the vulnerability of individuals as expressed by other Members of the Committee, these plans are crying out to be brought into the Act.
	I too am puzzled at the Government's reluctance. It was said in reply that they are considering this along with the response from the Royal Commission on Long-Term Care of the Elderly. Having been both a Treasury Minister and the Secretary of State for Social Services, I understand the Government's difficulty with the Royal Commission. It will surprise me if anything substantial comes forward on that in the next few years. But that is not a reason for refusing to bring long-term care insurance within the Bill. I hope that the Government will respond to the pleas that have come from all parts of the Chamber for that.

Baroness Dean of Thornton-le-Fylde: I too support the amendment and everything said in its favour this evening. It is probably appropriate that I declare an interest. I am a member of the General Insurance Standards Council. I do not seek to speak for the council tonight. Indeed, I have no idea what its members' views are. I am sure that if the majority of my colleagues on the council were asked, their view would be that we have not discussed it because we assumed that this area would be covered by the Financial Services and Markets Bill. It is right that it should be.
	I am pleased to support the amendment. I am reluctant to be drawn into the view that regulation will deter growth in this sector. Rather, I believe the reverse. If we look at sectors which are well regulated, the consumer has confidence in them to support and buy the products. We are still suffering from the mis-selling of pensions. Many people who would be in the appropriate bracket to buy long-term care packages, will be the very people who were victims of mis-sold pensions. They will be looking for some kind of confidence and guarantee that what they are entering into--an enormous financial commitment for the individual--will be properly regulated.
	The proper way to regulate would be for it to come within the purview of the Bill from the beginning, not waiting to see if there is any mis-selling and, if there has been, what damage has been done when it is too late to rectify that damage. Many of these people will be elderly. I hope that the Minister will respond positively to the amendment.

Lord Desai: If the Government are minded not to follow the recommendations of the Royal Commission, it is all the more necessary that the market should be regulated. That should be the most important priority.
	I have read that most of us use care services or health services in our lifetime, and 90 per cent of that use is in the last two years of our lives. Therefore, these decisions will be very important to a lot of people. Their anxiety about choosing the right product will be all the greater. Given the mental strain that people are under when they are elderly, it is very important that they can be sure that what they buy is guaranteed to deliver the service that is claimed.

Lord Clement-Jones: I am more used to taking part in health and social service debates, and precisely for that reason I should like to express very strong support for the amendment.
	Long-term care insurance is extremely important because so many people are potentially affected by it. There are currently half a million people in nursing and residential homes, and the costs per annum are extremely high, of the order of £18,000 to £23,000 depending on the area of the country in which you live.
	Most of us can confidently predict that the Government are unlikely to pick up a substantial part of that cost, and in view of their very delayed reaction to the report of the Royal Commission, it appears that they are terrified to make a decision on the subject. In view of those costs, I am not surprised.
	Even personal care that is provided at home can be a substantial cost. It can be of the order of £15,000 per annum. The investment required in order to cover those costs is potentially very large indeed.
	The products designed to provide all or part of these costs and to allow older people to plan with confidence are extraordinarily complex. I have carried out an exercise in relation to some of these products. I have looked at them as if I were insuring for my own future at the age of 50. It is as if there is a huge set of multiple choice hurdles in front of the intending insured. These are some of the questions. Will it be a lump sum capital bond? Will there be an insurance product linked to it? Will the capital growth pay the premium? Will it be a pure insurance product with a single premium or a monthly payment? If it is a bond, what type of bond will it be? One company has three types of bond: capital growth, capital reserve or the protection select option. Others have more types of capital bond. What conditions are excluded from the insurance? Mental health conditions like schizophrenia are often excluded from this type of insurance. When is the insurance triggered?
	The noble Lord, Lord Jenkin, spoke of the rather archaic activities of daily living that are included in these insurances. How many of these activities of daily living must a person be unable to carry out before they are regarded as being severely or moderately disabled? Is there an option of a capital sum to pay for assisted devices, for example stair lifts? Are the services of an independent care consultant provided? What extra frills are provided, such as a bed reservation benefit? Is respite care included for carers? Is so-called accelerated care cover included?
	All these options affect the cost of the insurance or the bond, and I have not even begun to address the issue of growth assumptions and how much a person may need to insure or put aside for this purpose. There are widely differing assumptions about what the cost of care will be in 10 or 20 years' time, and insurance companies use a very wide range of cost projections indeed, some of them of doubtful accuracy. In that context, is the product indexed? What charges are made and what is the administration fee? What is the establishment charge? What is the annual fund management charge? What are the encashment charges? What commission does an independent financial adviser receive?
	Just looking at some of these options--this multiple choice set of hurdles--one can see that there are clearly massive traps for the unwary. At the very least, such products should be brought within the scope of the Bill. At present, they are covered only by the ABI codes of practice. In the light of the ABI's performance as regards genetic testing, I suggest that a voluntary code is not good enough. If anything, the ambit of the current amendment is rather narrower than it should be. Some of the products are not insurance products, yet they still purport to be long-term care products. Disputes and complaints should also be covered by the Bill, but the amendment does not cover them. Nevertheless, I very much hope that the Government will see the enormous sense in these proposals and that they will agree to accept the amendment.

Lord Joffe: I, too, wish to express my support for the amendment. As other noble Lords have said, the products are very complex. I know just how complex they are because, with the noble Lord, Lord Lipsey, I sat on the Royal Commission for the care of the elderly and we were required to analyse these products. With some experience in the field, I, frankly, was unable to understand them, or certain sections of them.
	It seems strange that consumers of even simple products like unit trusts are fully protected, even when the amount at risk and the risk of mis-selling is small. If this is so, what is the logic for the decision not to regulate long-term care products when they are so complex and the most vulnerable members of society are at risk? Indeed, it could be interpreted as a caring government discriminating against the elderly rather than in their favour.
	Every organisation that is concerned with consumer protection, ranging from Age Concern to the Consumers' Association, has underlined the importance of regulating long-term care products. Even the insurance industry, which has opposed much regulation over the years, has called for the regulation of long-term care products. The reason is self-evident: the industry knows the extent of mis-selling that is likely to take place and is desperate to avoid yet another assurance mis-selling scandal.
	Based on my 30 years' experience in the life assurance industry, my five years campaigning for effective regulation and my chairmanship of the complaints sub-committee of LAUTRO, the previous regulator, I reluctantly predict that if the Government do not regulate long-term care products now they will have no alternative but to do so within the next five years. By the time they then do so, there will be a significant number of elderly people to whom products will have been mis-sold and it will take much time and effort to seek to compensate them. Just as with the Home Income Plan selling scandal, a significant number of these victims will go to their graves before they have been compensated, with their last years having been blighted by the mis-selling that the Government had the opportunity to prevent.

Lord Newby: In rising to speak in the debate at this stage, I realise that I am in danger of exemplifying the old adage that everything has already been said but not everyone has said it. Therefore, in associating these Benches formally with this amendment, I want to stress what is, in a sense, the central juxtaposition of the reasoning behind the amendment. On the one hand, as we have heard, there is the immense complexity of the product being regulated and, on the other hand, there is the peculiar vulnerability of many of the people who are considering whether to purchase it.
	In many cases, the person who is considering whether to buy the product for the first time is already frail. But, more importantly, such a person may have recently become a widower or a widow and will, therefore, feel much more vulnerable than he or she has ever felt before. There is a particular need for such people to have confidence in the products that they are being asked to purchase. Moreover, those products should conform in such a way as to make it easier for such people to consider them rationally. Therefore we on these Benches--both Front-Bench and Back-Bench speakers--have no difficulty at all in enthusiastically supporting the amendment.

Lord Saatchi: As my noble friend Lord Jenkin has said, these Benches are in favour of the amendment. I wish to express that clearly. Given the range of support for the amendment throughout the Chamber, it would be a great pity if the Minister did not say something positive and constructive about the attitude that the Government might adopt to the clause we are discussing. It would be sadly backward looking on the part of the Government if they did not take the point made by the noble Lord, Lord Lipsey; namely, that this market is bound to grow. For the reasons that have been stated by the Liberal Democrat Benches, the time is overdue for these products to be brought within the regulatory guidelines.
	I do not mention the following figures to make a party political point, but do so strictly in support of the amendment of the noble Lord, Lord Lipsey. Every opinion survey shows that the public consider that the state of the NHS and healthcare is the number one issue facing the country. Research which probes more deeply what the crisis in the NHS means to people reveals that one of their greatest worries is how they will pay for their parents' or, indeed, their own old age. It is a sad fact that 72 per cent of the public now believe that the NHS is in crisis. They are considering private healthcare. I believe that I saw a figure today which claimed that 160,000 people have paid for their own major operations. The assumption behind the amendment of the noble Lord, Lord Lipsey, is 100 per cent correct; this area is bound to grow. It would be deeply sad if, through some ideological distaste of private healthcare, the Government were unable enthusiastically to support the amendment.

Lord McIntosh of Haringey: I assure the noble Lord that ideological distaste of private healthcare has nothing to do with the Government's response to the amendment. It is important to state that we do not place any emphasis on whether the amendment is technically correct. I said in response to the previous debate on mortgages that we were able to introduce regulation of mortgages without any amendment to the Bill. We would be able also to introduce regulation of long-term healthcare products without any amendment to the Bill. That is not the issue between us. We are talking about content, not form. If we want to introduce such regulation, we could do it by means of a statutory instrument subject to an affirmative resolution procedure in both Chambers. That would be the correct way to do it without introducing a regulated activities order within 28 days of Royal Assent.
	We understand the nature of the amendment. We understand the nature of the arguments which have been unanimous as between speakers on all sides of the Committee. We have listened carefully to what has been said. I think that it is recognised that we are discussing a new market where products are at an early stage of development. The market could evolve rapidly and most Members of the Committee appear to think that it will. We need to take account of that in our decisions about regulation. That is why we are working with industry to understand the way in which the products and the market are developing and have established a committee which comprises industry, the public sector, charities which represent the elderly population's interests and the financial services regulator, with a remit to see how long-term care insurance and other financial products could be made more attractive to a wider audience. We are concerned at all times to operate on the basis of sound regulatory practice. This means that before introducing new regulation we are anxious to carry out appropriate consultation and assessment of the costs and benefits.
	We have made that guiding principle clear. We wish to see a light touch where possible, but we want to ensure that there is consumer protection where necessary. This considered approach to consultation and assessment of costs and benefits is implicit in the Opposition's Amendments Nos. 103 and 137--which we shall discuss shortly--which would require the Treasury to consult before extending regulation. The same concerns underlie Liberal Democrat Amendment No. 279--which we have already debated--which would require draft statutory instruments to be submitted to the consumer and practitioner panels.
	We do not take lightly decisions to impose new regulations, but that does not mean that we will let the need for proper consideration cause unnecessary delay. On the contrary, we have no intention of waiting until evidence of actual consumer detriment occurs before taking action.
	When the Committee reports in the summer we shall have a better idea of the future size and shape of the market. We should then be able to assess in more depth the risks to vulnerable consumers; we should be able to form a judgment as to their needs in respect of information and other forms of protection; and we shall be better able to assess the products, including the complexity described, whether sales of those products fall technically within areas already subject to regulation, and the costs and benefits of further regulatory options.
	I have listened with great sympathy to all noble Lords who have spoken in favour of regulation. I think that there is less of a gap than there may appear to be at first sight between the Government and those noble Lords. We shall want to mull over the debate between now and Report stage to see whether we can find a way forward that meets the concerns expressed by noble Lords today.

Lord Northbrook: Before the Minister sits down, he mentioned dealing with these issues about mortgage regulation and long-term care by way of regulation. I do not understand why they cannot be put on the face of the Bill if he is genuinely sympathetic with the comments made on both subjects.

Lord McIntosh of Haringey: I do not know how much of the previous debate the noble Lord attended, but we have debated in considerable detail the relationship between Clause 20 and Schedule 2. We have debated the fact that Schedule 2 is an indicative list of the scope of regulation, but not a complete list. We have made clear that the Government will implement, if you like, both Clause 20 and Schedule 2 by the regulated activities order which will be introduced after Royal Assent. That will set forth on a committed basis, on a formal basis, those activities which are to be covered. But it will be done through secondary legislation rather than by amendments on the face of the Bill. It will be done that way because financial markets change over the years and we shall want to change the regulatory activities order from time to time when new products appear and new financial markets arise. We shall want to do that without having to change primary legislation by amendments to this Bill.

Lord Lipsey: I thought I was to have the rare pleasure of participating in a debate in which I could say I agreed with every single word said by noble Lords--until the noble Lord, Lord Jenkin, said that nothing would come of the Royal Commission report. My noble comrade-in-arms on that commission and myself are entirely optimistic that the sensible and carefully weighted recommendations of the minority will be accepted by the Government.
	I am grateful for the strong support offered by all sides and for the many different angles from which it has come. It represents a formidable case. From the tone of the Minister's remarks--especially the tone on which he finished--it is clear that he recognises that a formidable case has been made. In view of the assurances that he has given, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.
	[Amendment No. 100 not moved.]
	Clause 20 agreed to.
	Schedule 2 [Regulated Activities]:
	[Amendments Nos. 101 and 102 not moved.]

Lord Kingsland: moved Amendment No. 103:
	Page 226, line 30, at end insert--
	(" .--(1) The Treasury must publish a draft of any order proposed to be made under section 20(1) in the way appearing to them to be best calculated to bring it to the attention of the public.
	(2) The draft must be accompanied by--
	(a) an explanation of the purpose of the proposed order; and
	(b) notice that representations about the proposals may be made to the Treasury within a specified time.
	(3) Before making the proposed order, the Treasury must publish an account in general terms of--
	(a) the representations made to them in accordance with sub-paragraph (2)(b); and
	(b) their response to them.
	(4) If the order made by the Treasury differs from the draft published under sub-paragraph (1) in a way which is, in the opinion of the Treasury, significant, the Treasury must (in addition to complying with sub-paragraph (3)) publish details of the difference.
	(5) Sub-paragraphs (1) to (4) do not apply if the Treasury consider that the delay involved in complying with them would be prejudicial to the interests of consumers.").

Lord Kingsland: In moving this amendment, I should also like to speak to Amendment No. 137 which is listed in the same group.
	Clause 20 provides that,
	"An activity is a regulated activity for the purposes of this Act if it is an activity of a specified kind which is carried on by way of business and ... relates to an investment of a specified kind; or ... in the case of an activity of a kind which is also specified for the purposes of this paragraph, is carried on in relation to property of any kind".
	Part I of Schedule 2 describes in general terms the types of activities which are likely to be considered to be regulated activities; and Part II of the schedule sets out, in general terms, the types of investments which will be considered to be investment of a specified kind. Part III of Schedule 2 gives details of the order-making power of the Treasury under Clause 20 to specify regulated activities and investments.
	Throughout the Bill, the powers of the authority to make rules, codes and so on are subject to a requirement to carry out a public consultation on drafts of the rules and codes. Included, as part of the consultation procedure, is a requirement for the authority to publish an account in general terms of the representations made to it, as part of the consultation exercise, and the authority's response to those representations.
	No such requirement to carry out a public consultation applies to the Treasury's order-making powers. In practice, the Treasury usually does carry out a consultation exercise. However, there is no obligation to do so; and there is no requirement on the Treasury to give an account of the representations made to it or its response to those representations.
	This amendment--and indeed Amendment No. 137 in a different context--introduces to Schedule 2 the requirement to carry out a consultation exercise. The exercise is not as onerous as would apply to the authority in relation to its rule-making powers because the authority is also required to carry out a cost-benefit analysis in relation to proposed rules. No requirement to carry out a cost-benefit analysis has been included in this amendment. I beg to move.

Lord Newby: This is a slightly broader variant of our Amendment No. 279, which deals simply with a requirement on the FSA to consult the practitioner panel and the consumer panel. The amendment takes the provision, in a more elegant form of drafting, beyond that, and gives scope for wider consultation. I have every sympathy with the mover of the amendment. I hope that not only will the Minister be sympathetic, but that he may also be able to say yes in this case.

Lord McIntosh of Haringey: These amendments seek to impose on the Treasury requirements to consult on draft regulations and to make statements about the comments it has received during the consultation. Clearly, the noble Lord, Lord Kingsland, has looked at the consultation requirements that are imposed on the authority when it exercises its delegated legislative functions and he has clearly looked on them with favour, because he seeks to reproduce them here--

Lord Kingsland: Oh.

Lord McIntosh of Haringey: I wondered whether I should get away with that.
	We need to remember that the consultation arrangements imposed on the authority are there because they form part of what we sometimes refer to as the accountability package; that is to say, the Bill imposes a number of obligations on the authority to ensure that, in carrying out its functions, it does so in a way that is compatible with its general duties under Clause 1 of the Bill and to ensure that it is properly accountable. The need for the accountability package reflects the legal status of the authority--a company on which a range of statutory powers and functions are conferred by the Bill.
	The same arrangements are not necessary in the case of the Treasury because the Treasury is answerable to Parliament for its actions. That is why I am here. Indeed, when it comes to the exercise by the Treasury of its powers to make delegated legislation, those powers are exercisable by statutory instrument subject to the different procedures set out in Clause 404. Any orders and regulations under the Bill, excluding commencement orders, will either be subject to annulment by either House of Parliament or subject to approval by both Houses. The procedure that applies in particular cases will depend on the nature of the statutory instrument and the power in the Bill under which it is to be made.
	That leads me to two points. First, orders under Clause 20, which are the subject of Amendment No. 103, are already to be subject to an affirmative procedure when orders are first made under the power or, where such orders have the effect of bringing new types of activity within the scope of regulation, under the Bill. The second amendment, Amendment No. 137, relates to the power to make exemption orders under Clause 36. In its memorandum to the Delegated Powers and Deregulation Committee, the Treasury drew attention to the fact that it was reconsidering the procedure which should be applied to the exercise of that power. The Bill currently applies a negative procedure resolution. The committee recommended that the power should be subject to an affirmative procedure. The noble Lord, Lord Kingsland, may be aware that the Government have already indicated that they have accepted the committee's recommendation and will be bringing forward an amendment to achieve that result. My point therefore is that the two powers in question will be subject to an affirmative resolution procedure. The House will be able to debate the orders at the time they are made.
	My second point--this will be apparent from what I have already said--is that the arrangements we have proposed have been approved by the Delegated Powers and Deregulation Committee. It is the case that government departments are increasingly consulted on secondary legislation and, indeed, primary legislation, such as this Bill, before it is introduced into Parliament. The whole history of the Bill is extensive--one might almost say exhaustive--consultation. The Treasury's commitment to consulting on draft legislation has already been proven by this Bill. It has also consulted, as the noble Lord, Lord Kingsland, recognised, on a number of draft regulations and orders to be made under the Bill, including a draft of the orders under Clauses 20 and 36. Where it is practicable or helpful to do so, the Treasury will continue to consult on its draft legislation.
	In concluding my response, I should make one final point. The amendment seeks to impose an obligation on the Treasury in the specific case of orders under Clauses 20 and 36. That is unprecedented. I am aware of only one other piece of legislation that requires consultation by a government department before an order is made; namely, the Deregulation and Contracting Out Act 1994. But the kind of things that may be provided for in an order under that Act are very different. By their nature, orders under that Act do not define the detail of basic propositions that are set out on the face of an Act, which is the case with the powers that we are currently debating. A deregulation order under the 1994 Act can do away with vast swathes of legislation without being subject to parliamentary controls. That is certainly not the case with orders under Clauses 20 and 36. I hope that the noble Lord will not press the amendments.

Lord Kingsland: I thank the Minister for that response and I shall look carefully in Hansard at what he has said. I hope he will recognise that the fact that something has not been done in the past is not necessarily a good argument for not doing it now or in the future.

Lord McIntosh of Haringey: I had always assumed it was a Conservative principle that nothing should be done for the first time.

Lord Kingsland: Irrespective of my own party's principles, the fact that the party opposite introduced the European Convention on Human Rights and devolved power to Scotland and Wales in a very short period of time indicates that the philosophy just adumbrated by the Minister in relation to my amendment had no role whatever in the thinking of his Government in 1997 and 1998. Nevertheless, I shall read carefully the words of the Minister. Meanwhile, I beg leave to withdraw my amendment.

Amendment, by leave, withdrawn.
	Schedule 2 agreed to.
	Clauses 21 and 22 agreed to.
	Clause 23 [Contravention of section 19]:
	[Amendment No. 104 not moved.]
	Clause 23 agreed to.
	Clause 24 [Agreements made by unauthorised persons]:

Lord Kingsland: moved Amendment No. 105:
	Page 10, line 34, leave out ("purchaser")") and insert ("counter-party")").

Lord Kingsland: I now have the daunting task of moving Amendment No. 105 and speaking to Amendments Nos. 106 to 119. Amendment No. 105, together with Amendments Nos. 106 to 108, all relate to the same point, which admittedly is relatively minor. Clause 24 concerns,
	"An agreement made by a person in the course of carrying on a regulated activity in contravention of the general prohibition".
	It is provided that the agreement is unenforceable against the other party, who is defined as "the purchaser". The same definition is used in Clause 25 in relation to an agreement made with an authorised person,
	"in consequence of something said or done by another person ... in the course of a regulated activity carried on by the third party in contravention of the general prohibition".
	In practice, the party to the agreement, who is defined as "the purchaser", could be both the purchaser and seller of an investment. It is confusing to define a person as the purchaser when an appropriate less confusing alternative--in this case, we suggest "counter-party"--is available.
	Amendments Nos. 109 to 111 all relate to Clause 26 which is concerned with agreements that are made unenforceable under Clauses 24 and 25. Under Clause 26(3) the court may allow the agreement to be enforced, or money or property paid or transferred under the agreement to be retained, if the enforcement conditions are met. The enforcement conditions set out in Clause 26(4) are,
	"that it is just and equitable for the agreement to be enforced or (as the case may be) for the money or property paid or transferred under the agreement to be retained",
	and that either of the requirements of paragraph (a) or (b) is satisfied. Given that a court must be satisfied,
	"that it is just and equitable for the agreement to be enforced or (as the case may be) for the money or property paid or transferred under the agreement to be retained",
	it is unnecessary to stipulate further conditions which must be satisfied. In exercising its judgment as to what is just and equitable, a court will take into account a number of factors, including the belief of the relevant party to the agreement and the state of his knowledge. Accordingly, the further enforcement conditions in Clause 26(4) are unnecessary.
	I turn next to Amendment No. 113. In passing, I note that the amendment seeks to insert into Clause 27 the verb "made" after "('the deposit-taker')" in line 8 on page 12. The reason is that the word "made" appears to have been omitted.

Lord McIntosh of Haringey: Yes. Move on!

Lord Kingsland: It is a simple drafting amendment to correct the omission and perhaps a triumph for the Opposition to hear the Minister so spontaneously, and without rising to his feet, concede the point.
	Amendment No. 114 is a corresponding amendment to, I think, Amendment No. 109 in the context of agreements entered into in the course of a deposit-taking business. Again it appears unnecessary in order for an agreement to be enforceable to go beyond what a court would regard to be just and equitable in the circumstances.
	On Amendment No. 115, although Clause 27 refers to the activity of deposit taking, there is no definition of what is meant by deposit taking. The amendment is intended to remedy that omission.
	I turn now to Amendment No. 116. It provides a new clause after Clause 27. Clause 24 deals with agreements made by a person in the course of carrying on a regulated activity in contravention of a general prohibition; while Clause 25 deals with agreements made by an authorised person in the course of carrying on a regulated activity, not in contravention of the general prohibition but in consequence of something said or done by another person in the course of a regulated activity carried on by that person in contravention of the general prohibition.
	Neither Clauses 24 nor 25 applies to deposit taking. Clause 27 relates to deposit taking and corresponds to Clause 24. However, there is no provision relating to deposit taking which corresponds to Clause 25: that is, an agreement made by an authorised person in the course of carrying on deposit taking but in consequence of something said or done by another person in the course of a regulated activity carried on by him in contravention of the general prohibition.
	The Government have argued that an equivalent provision to Clause 25 is not required in the context of deposit taking because it is not proposed to make giving advice on deposits a regulated activity. The difficulty with that approach is that the question of what is a regulated activity is determined by an order made by the Treasury. If, as subsequently may be the case, it is decided that the giving of advice on deposits should be a regulated activity, the Bill will be deficient as it will not deal with the case in relation to deposits in the same way as Clause 25 deals with agreements not involving deposits.
	The better approach is to include a new clause in the Bill covering the point and, if appropriate, to exclude its application by determining that the giving of advice in relation to deposits is not a regulated activity. If subsequently it is decided that the giving of advice in relation to deposits should be a regulated activity, the clause will then apply without the need for primary legislation to amend the provisions of the Bill.
	Amendments Nos. 117 to 119 correspond to Amendments Nos. 109 and 110 except that Clause 28 deals with the enforceability of agreements resulting from unlawful communications. However, the same points apply as before. I beg to move. I think that I have spoken to most of the amendments of note between Amendments Nos. 105 and 119.

Lord McIntosh of Haringey: If I start by saying that I shall consider most of these amendments sympathetically and agree to Amendment No. 113, perhaps the Committee will forgive me if I do what I think is my duty: to explain our attitude to each of them. There is some point in that; it is not simply resistance.
	The clauses we are dealing with broadly take forward existing provisions which confirm the normal presumption against enforcement by a person who enters into an agreement as a result of his own illegal activity or who enters into an agreement in the knowledge that the agreement results from the illegal activity of another person. However, the clauses provide some discretion for the courts to enforce where the person seeking to enforce can show that he reasonably believes that he was not acting illegally or did not know that the agreement resulted from the illegal activity of another and where the court considers enforcement just and equitable.
	The purpose of this is to provide a greater degree of certainty than would be provided by the general law. The boundary of what constitutes regulated activity is inevitably quite grey in some place. However, the point has been made to us that there are bound to be hard cases and that even the degree of discretion we have allowed the courts may not provide enough leeway.
	We acknowledge that. We have been considering further amendments to these clauses but thought it would be useful to consider the matter once more in debate. Broadly speaking, we agree that the principal test for the court should be whether enforcement would be just and equitable. However, unlike the amendments tabled by the noble Lord, Lord Kingsland, we think that the courts should be directed in particular to have regard to whether the person reasonably believed he was not breaching the prohibition or did not know that the agreement resulted from a breach by a third party.
	The compromise would still send a strong signal to the courts that reasonable belief or knowledge were factors to be accorded particular significance but would provide the kind of pressure valve which the noble Lord, Lord Kingsland, is seeking to enable the court to respond to a hard case and, where appropriate, allow enforcement.
	On that basis, I invite the noble Lord not to move Amendments Nos. 109 to 111, 114 and 117 to 119.
	As regards Amendments Nos. 119A and 119B, to which the noble Lord did not speak but which are included in the group, I hope that by establishing "just and equitable" as the principal test we will meet the concerns that lay behind two of the more recent amendments, Nos. 119A and 119B. They were printed during the weekend.
	Naturally, the question of whether the illegal promotion actually misled the purchaser in any way is something that the courts might consider. But we deliberately moved away from tests that focused on the content and effect of the promotion as a result of debates in another place.
	The main factor we are proposing should be taken into account by the court in determining what is just and equitable is whether the provider either reasonably believed that he was not breaching the financial promotion prohibition or did not know that he was doing business as a result of an illegal promotion by others. If the provider cannot satisfy those tests, he is in a sense complicit in the offence and it is not clear why the courts should be directed towards enforcing the contract.
	The same argument applies to a test which, like Amendment No. 119B, depends on what might have been envisaged when a breach of the financial promotion prohibition occurred. If the provider does not reasonably believe that he is not committing a breach, or knows that the agreement results from a breach by another, what may or may not have been envisaged by the person committing the breach should be neither here nor there.
	We have dealt with the substance of Amendment No. 116A in the context of Clause 19. However, we shall take away that amendment, too, and consider it further.
	As regards Amendments Nos. 105 onwards relating to "counter-party", we have reflected on the points that have been made about the potential confusion arising from the use of the term "purchaser" to denote the other party to the agreement. We accept that in some circumstances that party might be selling. To some extent, that does not matter as the term "purchaser" is just a label. However, we can see the scope for confusion. We are not convinced that simply switching to the label "counter-party" resolves the situation.
	We are not against the word "counter-party"--it may be the right word--but, arguably, it is confusing for one party to be a counter-party but not the other. That is not how the term is usually used. We shall resolve the potential confusion with the amendments we bring forward at Report stage. I hope that that will enable the noble Lord to withdraw Amendment No. 105 and not move Amendments Nos. 106 to 108 and 112. As he rightly said, Amendment No. 113 corrects a minor error in the drafting and I am grateful to him for tabling that amendment.
	Penultimately, I refer to Amendment No. 115, which concerns the definition of deposit-taking. I am afraid that I cannot accept this amendment, although I appreciate the intentions of proposing a definition. We have sought deliberately not to define deposit-taking. The existing provision works as it stands. The clause applies to deposit-taking which is carried on in contravention of the general prohibition. The extent to which the activity of deposit-taking comes within the scope of regulation will be defined by the regulated activity order made under Clause 20. It is that definition that is important for these purposes. Whatever the regulated activity order defines as being deposit-taking and carrying on a deposit-taking business for the purposes of the general prohibition will and should have the same meaning here.
	Perhaps I may explain why it is so important to keep these concepts tied together. The existing concept of a deposit-taking business for the purpose of the Banking Act includes various exclusions and exemptions which will be carried forward into the orders that we shall be making. For example, the current definition excludes the issuing of commercial paper, subject to various conditions. We do not want to create a situation whereby commercial paper issues that were perfectly legal would nevertheless become unenforceable under this clause. It may be argued that that is why the amendment refers to the "regulated activity" of accepting deposits.
	However, if that is the effect of those words, that definition merely applies whatever definition is included in the regulated activities order, which is the position that would hold anyway. In that case, what benefit is gained by including the definition here? The hidden danger is that this apparently substantive definition will create uncertainty. A separate definition which applies to this clause only is bound to create some risk of divergence between this clause and the regulated activities order. I hope that I made it clear in my response to a question from the noble Lord, Lord Northbrook, why it is being done in the form of an order, rather than on the face of the Bill.
	Amendment No. 116 would introduce a new clause dealing with deposit agreements entered into as a result of illegal regulated activity by a third party. The need for third party provisions in Clauses 25 and 26 arises from the fact that advising on and arranging deals in investments are currently regulated activities and will remain so under the regulated activities order. In the case of deposits, it is only the activity of accepting deposits that is intended to be a regulated activity. As now, there will be no third party activities, such as advising or arranging, which could be carried on by a third party in contravention of the general prohibition in relation to deposits. Therefore, equivalent third party provision would be an unnecessary complication.
	We accept in principle the main thrust of many of the opposition amendments in this group. Perhaps I may summarise by saying that we wish to consider further Amendments Nos. 105 to 108 and 109 to 112. We propose to accept Amendment No. 113 now and to consider Amendment No. 114. We must resist Amendments Nos. 115 and 116. We propose to consider further Amendments Nos. 116A, 117, 118 and 119, but we must resist Amendments Nos. 119A and 119B. Where we are considering further, we shall bring forward amendments on Report which will give the courts broader discretion than is the case under existing law or has been envisaged in the provisions to date.
	We are grateful to noble Lords for making this debate possible and for enabling us to make what I believe will be agreed progress on these matters.

Lord Kingsland: I am most grateful to the noble Lord for his careful response to this long line of amendments, and especially so for allowing me such a high hit rate. I am not talking about hitting the Minister; I am talking about hitting the statute book. However, I must express not only disappointment but a certain amount of surprise at what he said about Amendment No. 115; and I want to go away and think about that. It is a matter to which I may return at Report stage. I know that the Minister will understand that. Meanwhile, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.
	[Amendment No. 106 not moved.]
	Clause 24 agreed to.
	Clause 25 [Agreements made through unauthorised persons]:
	[Amendments Nos. 107 and 108 not moved.]
	Clause 25 agreed to.
	Clause 26 [Agreements made unenforceable by section 24 or 25]:
	[Amendments Nos. 109 to 112 not moved.]
	Clause 26 agreed to.
	Clause 27 [Deposit-taking in breach of general prohibition]:

Lord Kingsland: moved Amendment No. 113:
	Page 12, line 8, after ("deposit-taker")") insert ("made").
	On Question, amendment agreed to.
	[Amendments Nos. 114 and 115 not moved.]
	Clause 27, as amended, agreed to.
	[Amendment No. 116 not moved.]
	Clause 28 [Enforceability of agreements resulting from unlawful communications]:
	[Amendments Nos. 116A to 119B not moved.]
	Clause 28 agreed to.
	Clause 29 agreed to.
	Schedule 3 [EEA Passport Rights]:

Lord McIntosh of Haringey: moved Amendment No. 120:
	Page 230, line 49, leave out paragraph (b).

Lord McIntosh of Haringey: In moving this amendment, I should like to speak also to Amendments Nos. 132 and 259. Where an application for permission is granted under Part IV, the Bill used to require the authority to issue the applicant with a certificate of authorisation and provided that certificate with evidential weight in other matters relating to the authorised person's permission under the Bill. The intention was to ensure transparency.
	Practical concerns were raised about giving evidential weight to certificates of authorisation. Those concerns involve whether the certificate of authorisation takes precedence over the register and if it were to be discontinued, whether it would have to be physically repossessed and whether that may meet a refusal or whether it could have been lost; in other words, whether it is a suitable document for these purposes.
	Therefore, those provisions were removed in another place so as to enable the courts to exercise discretion as to the weight to place on the documentation issued to a person.
	Consequent on those changes, Amendments Nos. 120, 132 and 259 delete provisions which refer to certificates of authorisation. The Government propose also to remove Clause 193 which deals with the reissue of certificates of authorisation. I beg to move.

On Question, amendment agreed to.

Lord McIntosh of Haringey: I beg to move that the House be now resumed.

Moved accordingly, and, on Question, Motion agreed to.
	House resumed.
	House adjourned at twenty four minutes past eleven o'clock.